Wanting again over the past 10 years, Greggs (LSE: GRG) shares have been a standout performer on the FTSE 250. From a single store, the baker has develop into a excessive avenue staple. Within the final decade, its share price has climbed by over 490%.

This yr the retailer has stored up that robust efficiency, rising by 19.4% yr so far. For comparability, the FTSE 250 is up 6.7% throughout the identical interval.

I believe the FTSE 250 is full to the brim with high quality. However, on paper, given its progress, there’s actually a case to be made that Greggs may very well be among the finest shares to purchase on the index. Is it time I purchased some shares within the sausage roll maker for my portfolio? Let’s have a look.

As an investor who targets earnings, I need to begin by delving deeper into the passive earnings Greggs gives.

At the moment, the inventory yields a modest 2.1%. That’s under the FTSE 250 common of three.3%. So, it could not appear like probably the most attractive payout.

However I’m optimistic that it may rise within the instances to return. It has been on the up in years passed by and the agency appears eager to maintain rewarding shareholders. For instance, Greggs lifted its interim payout by 3p to 19p per share. That’s an 18.8% leap from final yr.

Main progress

With the expansion the enterprise has gone by way of in current instances, it’s not shocking that it’s keen to distribute additional cash to shareholders. Even regardless of the cost-of-living disaster, Greggs appears to be going from energy to energy.

In all equity, there’s the argument to be made that in instances like now, when shoppers’ pockets are squeezed, Greggs is in a primary place to learn. It’s outcomes actually pay homage to that concept.

For the primary half of the yr, gross sales rose by almost 14% to only shy of £1bn. On high of that, revenue earlier than tax additionally rose to £74.1m, or 16% larger than the yr prior.

Through the interval, Greggs additionally opened 99 new shops. The agency mentioned it’s now on monitor to open 140-160 new shops in 2024. It additionally continues to spend money on its provide chain, which can help its subsequent section of enlargement plans.

My points

So, it appears the enterprise has no plans of slowing down. However I’ve one concern with the inventory. That’s its valuation.

Greggs presently trades on a price-to-earnings (P/E) ratio of 23.3. The FTSE 250 common is round 12. In my eyes, Greggs seems costly.

Moreover, trying forward doesn’t paint a a lot brighter image. Greggs trades on a ahead P/E of 21.6. Once more, that appears prefer it may very well be too costly.

Except for its valuation, I’ve different considerations too. There’s no denying Greggs is extraordinarily in style resulting from its low-cost pricing and comfort. Nevertheless, I’m involved that customers these days are extra acutely aware than ever about what kind of meals they put of their physique. And I’d solely think about this to accentuate within the a long time to return. Greggs’ ultra-processed meals could style good, however it doesn’t precisely align with a wholesome life-style.

For that motive, in addition to its valuation, I’m steering away from Greggs for now. I see higher choices on the market on the FTSE 250.