It has been an unappetising year to be a shareholder in popular baker Greggs (LSE: GRG). Greggs shares are already down 6% in 2026, contributing to a 26% decline over the past 12 months.
I have taken advantage of a weakened price to add some of the shares to my portfolio.
I am hopeful about the long-term capital gain potential, if the share price rises.
There could be tasty returns
What might that look like?
If the shares simply get back to the same price as a year ago, that could turn £5,000 invested into around £6,770.
Notice incidentally, that that would be a 35% price gain.
That is right: when a share falls 26%, because of the new lower price, it needs to climb 35% simply to get back to where it was. It is easier going downhill than uphill!
A year ago, though, Greggs shares were already in trouble. They are now 51% below where they stood as recently as August 2024.
So, if the price gets back to that level from a year and a half ago, £5k invested now could turn into around £10k. Not bad at all!
The past is past
Then again, if I get back to how old I was a year and a half ago, I would be a year and a half younger.
The logic is impeccable: but we know for certain that it is not going to happen!
Just because a share has been at a certain price in the past does not necessarily mean it will get there again (or even anywhere close).
So tempting though it can be to look at price charts and think “what if…”, as an investor I think it is not useful.
Instead, I aim to look at what I think a business will be worth over the long term (discounted for the opportunity cost of tying up my money in its shares). I then consider whether the current price is attractive in comparison.
I think this could be a bargain
On that basis, it is helpful to acknowledge the challenges Greggs faces. A share price does not halve in a year and a half for no reason, after all.
Last summer’s unexpected profit warning raised questions about managerial competence. The company was blindsided by a spell of warm weather (in summer!) and did not get its product assortment right.
That remains a risk, but not the only one. Weight-loss medication may be reducing some consumers’ appetites.
Meanwhile, with thousands of shops already operating in the UK, Greggs risks diminishing returns with its ongoing programme of new openings.
Still, that estate provides economies of scale. It also points to the fact that Greggs is massively popular, thanks to a keen value proposition for customers, strong brand, and unique twist on popular products.
It is also profitable. Indeed, its spare cash helps fund a dividend: the yield currently sits at 4.4%.
So someone investing £5k today would hopefully earn around £220 in dividends annually, if the payout per share is simply maintained at its current level (as it was at the interim point last year).
Given these strengths, I see the price-to-earnings ratio of 10 as a possible bargain.
I regard this as a share for investors to consider.
