Greggs Share Price Fundamentals

Greggs Share Price Fundamentals

Sat Oct 09 2021 07:36
Gregg, a renowned bakery chain that is based in Newcastle, has been enjoying great success this year. Up to now, it has opened another 68 outlets and its like-for-like sales have increased by 3.5%. 

Investors should be excited because the baker is undertaking robust expansion activities which will increase GRG stock's price. At the moment, the GRG share price stands at €3,181 per share.

Greggs Share Prices are Up by 10% - Is Greggs Share a Buy?

Greggs share price has increased by around 10% according to the Q3 trading update that was released by the company. These numbers from the British on-the-go baker will assure its customers that their adored sausage rolls will not be affected by the recent supply chain disruptions that the majority of businesses in the UK are experiencing.

During this quarter, its like-for-like sales have enjoyed a growth of 3.5% as compared to the same time in 2019 just before the coronavirus pandemic stroked. More so, they were able to add 69 new shops to their network, although their target openings are 100 outlets.

In the company's reports, the management of the company insisted that they were not immune to the labour and supply chain constraints that other retail companies were going through and that they expect these inflationary pressures to continue even in 2022. 

However, the company put forward several ambitious projects for the 2026 fiscal year. One of the notable targets is a revenue target of €2.6 billion, which is over three times the amount they sold in 2020.

To achieve this, the company aims to expand its existing network of stores to about 3,000 stores which is an increase of 40% from a present number of 2,150 stores. They also aim to incorporate their delivery services in a greater number of locations.

So, will this uptick indicate an uptrend for Greggs share price or will the company succumb to concerns regarding their ability to keep their stores sufficiently stocked? This post will discuss Greggs share price fundamentals and probably answer these questions.

Technical Analysis of the Company's GRG's Stock Price

Since November 2020, its price has remarkably recovered after the encouraging news of the Pfizer vaccine. Therefore, so far in 2021, its stock has increased by 76.3%. 

Besides the uptick, the company also boasts trading volumes that are above average and its stock has been enjoying lengthy trendline support. In addition, the share price has increased more than its short-term moving averages.

Its MACD has also improved greatly and is closer to the signal line while its negative histogram readings have been steadily decreasing.

If the price keeps increasing in the future because of the assurance by Greggs' that its flagship commodity will not be impacted by the recent disruptions to the supply chain, then they could set a plausible target of €3,350 per share according to the price channel trajectory for the stock. This indicates a potential upside of 6.1% for GRG shares.

Fundamental Analysis of GRG Stock Price

In recent news & analysis, Roger Whiteside, the company's Chief Executive, assured GRG customers that their favourite meal would remain available saying, "The sausage rolls are safe, that's something we have not gone short of". 

The top executive went ahead to summarize the problems the company was undergoing by saying, "I wake every day and I find out what is short on that day because something's been disrupted in the supply chain."

These comments will encourage traders and investors while the long-term ambitious targets for the company might be a significant role in shaping the share price. 

If the management attains these targets or not will be critical for the performance of its shares in the foreseeable future.

A look at the past performance of the company indicates that it was able to increase its annual sales to €1.17 billion in 2019 from €894.2 million in 2016. This means that before the coronavirus pandemic, the company had a CAGR (compounded annual growth rate) of 9.4%. 

At the same time, the net margin of the baker surged around 100 basis points to about 7.5% with their net income after tax rising at €89 million by the end of 2019.

To grow its top-line results to the €2.6 billion targets in five-years time will mean that the company has to have a minimum top-line growth rate of 17.3% per year. This is twice the rate at which the company's sales had been growing in the years before the coronavirus pandemic. 

The capability to meet this target is quite questionable given the firm's past record and its plans to achieve these targets such as: 
  • Expanding the store count
  • Increasing the deliveries
  • Extending business hours
These measures do not look to be that effective in accelerating the company's growth to that extent. 

At the moment, the GRP price is at €3,181 per share and the firm is valued at 35 times its diluted earnings per share. Considering the rate at which the bottom-line profitability of GRG has been increasing from 2016 to 2019 (14% CAGR), the multiple looks to be stretched and the ambitious targets for the company look quite far-reaching and could be elusive. 

This is more so given the challenging business environment that the firm is presently facing.

Latest Developments Implemented by Gregg

Gregg is a unique food-on-the-go retailer and has acquired numerous locations across the UK and personal care market participants in recent months. 

Over 800 of its outlets have been enjoying a successful food delivery service in Great Britain and has resulted in a reassuring growth in sales volume. Based on like-for-like sales reports, many financial experts forecast that GRG shares will keep on improving in the coming months.

The negative impact that was experienced in 2020 disappeared upon the resumption of non-essential retail in the UK.

Reasons Why You Should Buy GRG Shares

Are you trying to figure out whether or not you should invest in GRG shares? Well, here are the reasons why you should invest in it:
  • Unlike the majority of its competitors in the same niche, it is a publicly listed company.
  • GRG has been experiencing an outstanding sales recovery after the UK government announced that it had eased lockdown restrictions.
  • The company has reported net sales of €352 million in the last eight weeks.
  • The delivery sales by GRG as of now are 9% of the shop sales that are managed by the company.
  • The company has been opening numerous shops and is planning to set up even more in the coming months.

Final Thoughts – Is Greggs Share a Buy?

The GRG stock's price has been steadily rising in 2021 although not at the same rate as the times preceding the coronavirus pandemic. 

Although many retailer companies have been experiencing disruptions to the supply chain, Gregg has handled the pandemic efficiently which has boosted investor confidence levels.

More so, products from the renowned bakery chain (sausage rolls, pastries, and sandwiches) are much adored by its loyal customers.

Furthermore, the easing of the lockdown restrictions helped this company to get back to its feet. This has made it possible for the company to introduce new targets that it aims to achieve. They plan to achieve these targets by expanding their store count, increasing their deliveries, and extending their business hours.

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