Supported by rapid expansion, profits at Greggs (LSE:GRG) have rocketed over the past decade, which in turn has driven its shares through the roof.
At £21.20 per share, Greggs’ shares are 154% more expensive than they were 10 years ago.
But is the FTSE 250 baker still one of the best growth shares to consider buying today?
Growth forecasts
From a short-term perspective, perhaps not. Analysts expect annual profits growth to halve this year before picking up to improved single-digit percentages in 2026:
| Year | Earnings per share | Earnings growth | Price-to-earnings (P/E) ratio |
|---|---|---|---|
| 2024 | 134.74p | 8% | 15.9 times |
| 2025 | 139.49p | 4% | 15.3 times |
| 2026 | 150.96p | 8% | 14.2 times |
There are plenty of other mid-cap UK shares tipped to provide better earnings growth over the next two years.
The predicted growth drop for 2025 isn’t that surprising given recent trading. Brokers have been downgrading forecasts following news on 9 January that revenues rose ‘just’ 7.7% in the final quarter.
This was down from 10.6% in quarter three, and 13.8% in the first half.
Like-for-like sales, meanwhile, slowed to a crawl in quarter four. They rose just 2.5%, down sharply from 5% in the prior three months.
Fears growing
Trading clearly hasn’t been catastrophic, though. Last year, sales moved through the £2bn landmark for the first time, with revenues growing even as the cost-of-living crisis dragged on. This isn’t the first time Greggs has delivered growth despite tough economic conditions.
Yet it’s also possible to understand why the market’s been underwhelmed by recent numbers. The company’s focus on low-cost food retail means such resilience is already baked (no pun intended) into investors’ expectations.
Instead, Greggs’ recent sales numbers have ignited concerns over whether the firm’s growth strategies — like greater evening trading, menu refreshments, and more Click and Collect — could be running out of steam.
What next?
Given the tough economic outlook, I wouldn’t be surprised if Greggs sales disappoint a bit longer, putting fresh stress on its share price.
But my view is that the baker’s growth outlook remains robust over the longer term. It’s why I’ve taken advantage of recent price weakness to buy more of its shares for my own portfolio.
New store openings have been the bedrock of Greggs’ soaring earnings in recent years. And encouragingly, it sees further scope for more significant expansion.
The firm’s added around 1,000 stores to its nationwide network since the mid-2010s. It plans to cut the ribbon on another 800, taking the total to 3,500. What’s more, the baker plans to ramp up store openings in lucrative travel destinations such as airports and rail stations.
Further expansion will be supported by investment in new distribution and manufacturing sites. Last year, it announced new facilities in Derby and Kettering, scheduled to open in 2026 and 2027, respectively. There is execution risk here, but Greggs’ strong record on this front should help soothe investors’ fears.
I’m also confident that Greggs’ enhanced delivery and digital services and longer store opening hours will help light a fire under long-term earnings growth.
As a result, I still think Greggs remains a top growth share for investors to consider buying, despite the company’s current troubles.
This post was originally published on Motley Fool
