Barclays Capital have entered the arena with an equal weighting and target price of 14.05 pounds sterling while initiating coverage.
Investec Securities have increased their target price from 13.50 to 14.50 pounds sterling and advising a buy for Greggs, which in their recent review of the retail sector they describe as a 'steady eddy compounder'.
The share price has now hovered around the 13.50 mark for longer than the previous two peaks in the last two years at around 13. It would appear to be getting itself established at this level before making the next leap early in the new year shortly after the next trading update in mid January.
That will also be about the time when we should hopefully here more about a number of new drive thro' locations, and this could turbo charge the shares.
"With plenty of stocks currently trading at all-time or multi-year highs, investors are right to be sceptical about valuations in some sectors. But any pull back from lofty levels can present buying opportunities, and that's clearly what's ..."
Greggs have apparently been encouraged by the popularity of the first Drive Thru in Irlam, Manchester. It looks likely that we will see further trial locations opened in this format fairly soon.
The roll out of the central forecasting and replenishment system has been sucessfully completed ahead of plan, and has been the 'most significant process change ever embarked upon' by the Company. The biggest impacts are likely to come in increased product availability in stores and reduced wastage.
The interim dividend is to be increased by 10 per cent. The dividends are now largely formulaic as the interim is one third of the previous year's total and the final is based on two times cover.
The long run rate of like for like sales increases appears to be largely settled in the 3 to 4 per cent range on a year to year basis over a number of years.
On checking the Stockopedia website today I noticed that Greggs is now classified as a 'Super Stock' have most recently been classified as 'Neutral'.
This as far as I can recollect may be the first time it has been in this Super Stock classification [the 'best' classification ] since around the end of 2014, when you might remember that the Greggs share price subsequently doubled in very short order.
I think this bodes well for the share price and believe that things might well start to happen for the share price in a positive fashion as early as next month following the trading update and Interim Earnings release due this coming Tuesday 1 August.
Adjusted Earnings before Interest and Tax [EBIT] were running at around 40-50 million pounds sterling between 2007 and 2013.
Since 2013 they have 'taken flight' and have risen sharply to reach 80 million in 2016 with this rise set to continue well into the future.
This is, and will contiue to be, achieved by the addition of approximately 100 new outlets per year with a figure of 2,500 units now being openly discussed by management, giving a seven year expansion target from the 1,800 units at present.
The current very high levels of investment in the business will allow it to expand it's digital presence so that 'click and collect' will become available alongside plans for mobile ordering and the ability to customise orders.
This is a genuinely innovative business which is determined to be right up with events.
Greggs continues to innovate through it's on-going five year programme for change in all areas of the business.
The summer menu is full of new ideas and there is a first 'drive thru' in Manchester [ acouple of years ago I posted a message on April Fools Day that this had happened but now it is no joke].
The performance in the early part of this year has been better than the market expected, and as we approach the mid point of the year the market will begin to turn it's attention to 2018 when earnings per share are predicted to increase dramatically compared to what was previuosly 'pencilled in' for 2017.
While admitting that a special dividend must now be a non-starter for 2017 I still hold to my belief that a special dividend in 2018 is a better than 50 per cent bet, with the cash availability being at least in part dependent on the sale of the former bakery site at Twickenham for housing, which again I have to admit cannot be taken for granted that it will occur in 2018.
The trading update this morning was very much in line with my expectations, and keeps the Company on course with it's plans. The AGM tomorrow should be a relatively happy affair.
Essentially franchised units now make up 10 per cent of the total, while sales for the year to date are ahead of consensus estimates. Northern Ireland and the West Country specifically mentioned as targets for new units.
Well actually I have owned Greggs shares for more than 30 years but the information I am sharing relates to a holding period of 27 years from September 1988 to September 2015. The information and calculations are not my own.
Sales Compound annual growth rate of 9.57 per cent over 27 years
Earnings Compound annual growth rate of 10.42 per cent over 27 years
Dividends Compound annual growth rate of 15.46 per cent over 27 years
Since you ask your purchase in 1988 of 1,000 pounds sterling worth of Greggs shares in 1988 would be worth nearly 26,000 pounds sterling today.
Again since you ask in the single year of 2015 you would have received in dividend income more than your original investment.
And again since you ask you would have received in total more than 6,000 pounds sterling in dividends over the 27 years.
Now that is some Company - and I am sure that shareholders will be pleasantly surprised by the content of the trading update due at 7 am on Thursday 18 May.
The strong buy is for the long term , and you can see that I really mean that, as ever.
The executive Directors have just acquired over 15,000 shares between three of them.
That is a vote of faith in my book with the chief executive purchasing more than 10,000 shares personally.
Like the Directors of the Company I have great faith in Greggs. My faith is at least in part due to my belief that Greggswill be the provider of further future Special Dividends, and just maybe that may also be the case for the Directors, who have better knowledge of this situation/likelihood than I do for obvious reasons.
Decent Profits, Good Expansion, healthy products, yet every time I look GRG is red.
Down again today on a good day in the markets in general. Anyone any thoughts of this company and perhaps reasons it is behaving in a dire fashion?
Less than 10 days since a very encouraging trading update and we are back where we were in terms of the share price.
In December 2015 franchised units represented 6 per cent of total units, in September 2016 it was 8 per cent and the latest figure is 9 per cent or 157 franchises and 1,764 units in total. 99 franchised outlets are within properties owned by Euro Garages and a further substantial number are within Moto service stations.
It would appear that the franchised part of the business is growing 'apace', and faster than most comentators forecast. On that basis I see the figure of 10 per cent being surpassed quicker than most forecast, and 15 percent looking like the next target rather than an assumed 10 per cent.
The important thing to note about the Frachise Model is that it delivers immediate profits as against Company owned units which typically take around one year to get established and start generating profits. those immediate profits go straight to the 'bottom line'.
I think, all other things being equal [which I grant you they seldom are], a modest 'Special' dividend is a possibility in the middle to back end of 2017, perhaps half the size of the most recent such payment of 20p per share, ie 10p costing the Company 10 million pounds. Whether it starts in 2017 or 218 it will be the start of an annual 'special' dividend as the Company's investment cycle continues to produce the goods.
"Cooking up its thirteenth consecutive quarter of sales growth, full-year results from LSE:GRG:Greggs are set to beat expectations once again. The high street baker has been hard at work transforming its stores and ranges, and the overhaul ..."
" Life on the high street remains tough and shop-face businesses are under pressure. LSE:GRG:Greggs is no different, but with the transformation of its stores and new, healthier products well underway, the company and its shareholders are reaping ..."
Less than two weeks to the interim results and trading update on 2 August.
We will find out if it was right to lump Greggs in with all the other Brexit sufferers, or whether the Company really is a special case as I believe it is.
Greggs is a one-off and the results and trading update will prove it - you heard it here first, or perhaps not since most of the analysts currently have unchanged buy advice and 12 month forecasts from prior to the Referendum.
Yes to that.....Brexit is like a computer crash and we are still in the OMG what has happened phase. Still, after we reboot with the EU, with due time and effort, I hope that our 'computer' will work as well as before.
Greggs crept back over the 1 billion pound sterling valuation mark today before closing the week 2m short of that figure.
To some extent everything got lumped together in the early days of the general 'nobody knows what is going on and what is going to happen next' crisis.
And yet let us not forget that Greggs is a retail winner and likely to have a competitive advantage according to Warren Buffet's formula of such companies having gross margin's consistently above 40 per cent.
Greggs enjoys a gross margin of consistently more than 60 per cent, whereas Marks and Spencer over the period 2005-2014 [FT] had gross margins of between 35 and 39 per cent. Debenham and BHS over the same period were respectively between 10 and 20 per cent, and 0 and 20 per cent, with zero being the approximate figure for BHS in 2009, 2011, 2012, 2013 and 2014.
Agreed, the sell-off looks too swift and steep for me.....so I have topped up, hoping for a 10% short-term bounce. We'll see, of course, as post Brexit is going to be choppy.
If I'm wrong then I'll just have to buy another Greggs sausage roll.
According to Robert Sutherland Smith in his recent article for Master Investor, when Greggs' price was 10.90, in precise or ACTUAL terms the forward or forecast p/e for Greggs based on forecast earnings per share of 59p for 2016, was not 18.5 but 14.
If you wish to establish more precisely what it is an investor is paying for the ACTUAL earnings per share, you need to adjust for the amount of shareholder equity [266m], Greggs has no debt. Once this amount is removed from the market value of the Company, as it should be because it is this equity that 'commands' the total assets of the Company in the current sum of 384m, then you have a market value of 835m, or approx 8.27 per share.
835m divided by 101m shares gives 8.27 pounds per share and 8.27 divided by 59p eps gives an ACTUAL p/e multiple of 14 times for 2016.
Looking to 2017 with forecast eps of 62.8p the p/e is apparently/conventionally 17.3 which is close to last year's conventional arrived at p/e of 17.5. But in ACTUAL terms this forecast figure should be a much more palatable 13.1 times.
There is real value, 'unseen' / actual, in Greggs.
With a relatively high Price Earnings ratio Greggs may look superficially relatively unattractive. This ratio does not capture a company's future prospects as well as one that looks at it's return on invested capital [ROIC] where Greggs has superlative performance metrics.
The Company has the huge twin advantages of low cost of production and scale advantages. This would be of less future share price performance relevance if it was not for the fact that it sees the prospect of there being scope and room for significantly more than 2,000 units in the future compared with it's current 1,720 or so.
Put another way - Greggs has a strong defence in the form of a moat because of it's size and it's vertically integrated model, but not only that, it's moat is a 'Re-investment Moat', essentially because of it's 'very long runway' of expansion stretching into the future.
Superficially you might think that if you buy Greggs at the current P/E ratio you might be buying a quality company at a high water mark valuation, from which the share price can only be maintained or fall.
The primary driver of the share price from this point is the expansion plans, providing the long runway to bolster the re-investment moat.
Some other drivers of course include it's dividend growth, it's 23 years of dividend payment, strong likelihood of regular special dividends and it's current long term programme of investment in it's means of production and productivity
The strong buy is for the long term as ever.
[source of the idea of the re-investment moat comes from an article by Connor Leonard that I found on Base Hit Investing . com
Important message from the Financial Conduct Authority:
Posting inside information that is not public knowledge, or information that is false or misleading, may constitute market abuse.
This could lead to an unlimited fine and up to seven years in prison.
If you have any information, concerns or queries about market abuse, click here.
The content of the messages posted represents the opinions of the author, and does not represent the opinions of Interactive Investor Trading Limited or its affiliates and has not been approved or issued by Interactive Investor Trading Limited.
You should be aware that the other participants of the above discussion group are strangers to you and may make statements which may be misleading, deceptive or wrong.
Please remember that the value of investments or income from them may go down as well as up and that the past performance of an investment is not a guide to its performance in the future.
The discussion boards on this site are intended to be an information sharing forum and is not intended to address your particular requirements.
Whilst information provided on them can help with your investment research you need to consider carefully whether you should make (or refraining from making) investment or other decisions based on what you see without doing further research on investments you are interested in.
Participating in this forum cannot be a substitute for obtaining advice from an appropriate expert independent adviser who takes into account your circumstances and specific investment needs in selected investments that are appropriate for you.