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While Greggs plc (LON:GRG) might not have the largest market cap around , it received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to UK£28.32 at one point, and dropping to the lows of UK£16.87. 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' current trading price of UK£16.87 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?
Great news for investors – Greggs is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 11.16x is currently well-below the industry average of 16.15x, meaning that it is trading at a cheaper price relative to its peers. However, given that Greggs’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
See our latest analysis for Greggs
What kind of growth will Greggs generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Though in the case of Greggs, it is expected to deliver a negative earnings growth of -4.1%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What This Means For You
Are you a shareholder? Although GRG is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to GRG, or whether diversifying into another stock may be a better move for your total risk and return.