Edison Investment Research Optimistic about Greggs' Future Performance

Edison Investment Research Limited has released a positive outlook on Greggs PLC, highlighting the success of the bakery chain's five-year growth plan to double its revenue by the 2026 fiscal year. Despite a challenging external environment, Greggs has seen remarkable success in its second full year into the plan, marked by significant volume growth alongside high selling price inflation. This combination has enabled the company to secure good market share gains.

The report appreciates the effective management of profitability at Greggs, noting an improved recovery of input cost inflation compared to the previous fiscal year. With an optimistic stance, Edison anticipates the continuation of similar trends into FY24, a year deemed critical from a capital investment standpoint, and beyond.

Furthermore, Edison has updated its DCF-based valuation of Greggs, raising the target to £30.20 from £29.70, after adjusting estimates and reducing the WACC from 10% to 9%. This revision reflects lower bond yields and equity risk premium. The forecasted EV/sales and P/E multiples for FY24 position Greggs at the mid to upper range of its recent average, indicating a strong performance outlook.