Greggs has beaten the market but I’d still stay away

Greggs plc (LON: GRG) has bucked the trend of the high street but market overreactions may be the reason.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The FTSE might have recovered slightly but we are still in bear market territory, so it’s interesting to see the companies that have done well. These are the five best performing shares over the last six months for the largest 350 companies listed on the London Stock Exchange.

  1. Greggs up 65.6%
  2. BTG up 59.4%
  3. Acacia Mining up 59.4%
  4. Dunelm up 38.9%
  5. Telecom Plus up 37.5%

The performance of the FTSE 350 index over this time was nearly -11% so these companies have done exceptionally well. Greggs (LSE:GRG) dominates the list but slightly benefits from its price being severely depressed at nearly a two-year low six months ago.

On a roll

The outlook for Greggs was bleakest in May following a profit warning which suggested the company was struggling along with the rest of the high street. However on July 31, it released its interim results reporting on a “resilient performance” with profits likely to be similar to 2017. This started the reversal of the share price decline. 

Should you invest £1,000 in Dotdigital Group Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Dotdigital Group Plc made the list?

See the 6 stocks

It achieved these positive result by moving to a ‘healthier’ food offering, which was popular in the hot weather conditions. This provided investors with some relief following the lowered profit expectations from May but it did not indicate a vast improvement in performance. Some institutional buyers clearly noticed that the selling had been overdone and there was some big buying in the run-up to the results. 

In the October trading update, the company reported improved like-for-like trading, but profits still expected to be in line with lowered expectations from May. Then in November the company acknowledged that as a result of stronger like-for-like trading, profits were back on track would be ahead of expectations. This was revised upwards further in January.

Recipe for success

There are several reasons for Greggs success. Some of this was making up lost ground following the poor outlook given in May. This can be seen as the share price didn’t actually hit new highs until January even though there had been months of good news. Crucially two things helped it. Firstly, despite poor high street performance, there are still a lot of people who work in towns who don’t change their eating habits or visits to Greggs just because they’re now shopping online more. And perhaps more importantly, the company responded well to a challenging consumer backdrop. It released new healthier/vegan products that were well received by the public.

Value for money

Investors that were familiar with the company noticed that the profits reported in July meant that the profit warning in May showed only a blip in trading that affected the share price but not the long term outlook. Some big institutions obviously felt the selling was overdone as they bought heavily before the results when the price-to-earnings ratio (P/E) was around 15. Institutional buying has a big impact on the share price because it reduces share availability by hoovering up the unwanted shares in large volumes. This forces the price higher, so institutional buys are worth paying attention to.

Full-year expectations are slightly ahead of the start of the year, however the price is 14% higher than the previous all-time high. This suggests the recovery is now priced in or even overdone. The P/E is 21.5, the top end of the usual range for Greggs, os it isn’t a company that I’d be looking to buy at this time.

Should you buy Dotdigital Group Plc now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Robert Faulkner has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Mature black couple enjoying shopping together in UK high street
Investing Articles

Here’s how a 50-year-old could aim for £1,400-a-month passive income from an ISA

Investing in a Stocks and Shares ISA is one way to target long-term passive income, even for those hitting their…

Read more »

Investing Articles

After hitting a new 52-week low can the Diageo share price ever recover? See what the experts say

Harvey Jones has taken a beating on the Diageo share price, and there's no end to his misery in sight.…

Read more »

Investing Articles

Should I cash in my Rolls-Royce shares?

This investor in Rolls-Royce shares is wondering whether now might be the best time to sell up and move on…

Read more »

Investing Articles

With gold above $3,000, is it time to consider buying this FTSE miner?

Here’s one FTSE 100 stock that should -- in theory -- benefit from the current global uncertainty and a rising…

Read more »

Investing Articles

3 possible ways to generate a £1k monthly second income in the stock market

Our writer outlines a trio of approaches someone could take to try and build a four-figure monthly second income from…

Read more »

Investing Articles

Is the booming BAE Systems share price a deadly trap?

The BAE system share price has been a huge beneficiary of today's geopolitical uncertainty but investors considering the stock should…

Read more »

Investing Articles

Thank you stock market: a rare chance to consider buying Nvidia stock?

Market forces have brought Nvidia stock and many of its peers down as the Nasdaq and S&P 500 reach correction…

Read more »

A couple celebrating moving in to a new home
Investing Articles

Time for a Berkeley Group share price recovery as FY guidance is confirmed?

After slumping in 2024, investors will want to see better from the Berkeley Group Holdings share price. Here's what the…

Read more »