Greggs (LSE:GRG): Exploring Valuation as Shares See Modest Recent Bump

Greggs (LSE:GRG) shares have seen a modest bump this week, gaining about 1% in the latest session. Investors may be taking a closer look at the bakery chain's recent performance, particularly as the shares have recovered slightly this month.

See our latest analysis for Greggs.

While Greggs’ share price has ticked up recently, overall momentum has cooled this year, with a modest 1-year total shareholder return just below flat. Markets seem to be weighing growth prospects against ongoing challenges, so investors are watching to see if positive sentiment can remain.

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But with the shares trading below analyst targets and a mixed track record over the last year, is Greggs now trading at a bargain? Or is all of the future growth already built into the price?

Most Popular Narrative: 18.9% Undervalued

With Greggs’ most popular narrative assigning a fair value nearly 19% above the last close, the stock looks discounted on this measure. That figure reflects optimistic expectations for revenue growth and margin resilience, setting the backdrop for a potentially upbeat outlook.

The accelerating adoption of digital ordering, delivery platforms, and loyalty app engagement (now at 25% of shop visits) enables Greggs to grow incremental sales, boost frequency of visits through personalized marketing, and potentially lift average transaction values. This could have positive implications for both revenue and earnings.

Read the complete narrative.

What quantifiable shift is at the core of this bullish narrative? Behind the high fair value sits a formula driven by projected surges in digital-driven sales and a future profit multiple seldom seen in this industry. Curious what numbers underpin such optimism? Uncover the financial leaps the consensus is betting on for Greggs.

Result: Fair Value of £20.66 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, weak underlying demand or sustained cost pressures could quickly undermine the positive outlook that analysts have built into their valuation assumptions.

Find out about the key risks to this Greggs narrative.

Another View: What Does the SWS DCF Model Say?

While the most popular narrative values Greggs’ shares nearly 19% higher than today’s close, our SWS DCF model tells a more cautious story. Using projected cash flows, the model estimates a fair value of £13.70. This suggests shares are currently trading well above this level. Does the market know something the model does not, or are expectations running ahead of reality?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Greggs for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Greggs Narrative

If you want a different perspective or would rather dig into the data yourself, you can craft your own narrative in just a few minutes by using Do it your way.

A great starting point for your Greggs research is our analysis highlighting 4 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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