Greggs plc (LON:GRG), which is in the hospitality business, and is based in United Kingdom, received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to UK£23.92 at one point, and dropping to the lows of UK£17.49. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Greggs's current trading price of UK£18.05 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Greggs’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is Greggs worth?
According to my valuation model, Greggs seems to be fairly priced at around 10% below my intrinsic value, which means if you buy Greggs today, you’d be paying a reasonable price for it. And if you believe the company’s true value is £20.11, then there isn’t much room for the share price grow beyond what it’s currently trading. In addition to this, Greggs has a low beta, which suggests its share price is less volatile than the wider market.
What does the future of Greggs look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 26% over the next couple of years, the future seems bright for Greggs. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? GRG’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on GRG, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Greggs. You can find everything you need to know about Greggs in the latest infographic research report. If you are no longer interested in Greggs, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.