Greggs delivers decent growth but valuation remains full, says Shore Capital

Shore Capital has maintained a 'hold' rating on Greggs despite a strong start to the year from the bakery chain, saying that the shares look "up with events for now".

The company delivered "yet another strong trading update" on Monday, according to Shore Capital, reporting a 7.4% increase in like-for-like sales in the first 19 weeks of 2024 – though momentum did ease slightly in the latter nine weeks with LFL sales rising 6.6%.

What's more, the company's estate continues to built out with substantial investment, with 64 new shops opening during the period, taking the total estate to 2,500 stores.

However, the stock trades at a price-to-earnings ratio (PER) of 21 on 2024 estimates, which Shore Capital said was "quite fulsome", especially when compared with the wider FTSE 100 and UK consumer-focused competitors.

The valuation is "up with events for now and, looking at the sideways trajectory of the share, so does the market too," the broker said.

The stock was down 1.6% at 2,774p by 1031 BST, having traded within a tight range off 2,700p to 2,900p for the past three months.

"Substantial growth is planned, as evidenced by the major aforementioned investment programme, which should help to compress those equity valuation metrics in time; an FY26 PER of c17.2x, which is still attractive, is forecast," Shore Capital said.

"However, in the here and now, we not changing our neutral rating on Greggs stocks, noting quite sustained sideways movement and recent relative underperformance as UK stocks have edged off their undeserved lows."