Greggs‘ (LSE: GRG) shares have tanked recently. Over the last 15 months, they’ve fallen about 50%. So could they be a top turnaround play for 2026? Let’s take a look at the set-up.

A solid business

Greggs is a decent business. For a start, it has a very strong brand. Everyone knows this food-on-the-go company. Generally speaking, it’s trusted by consumers and seen as good value.

The retailer is also quite profitable. Typically, return on capital employed (ROCE) is about 20%, meaning that it’s far more profitable than the average UK business.

Given this high return on capital, the company has the financial firepower to open more shops in the past. In other words, it’s been able to reinvest its profits to drive growth.

As a result of this compounding strategy, the company’s put together a solid growth track record. Between 2014 and 2024, for example, net income rose from £38m to £153m.

Looking ahead, Greggs is planning to open more shops. This year, it’s targeting 120 new openings (it had 2,739 at the end of 2025).

The shares look cheap

Now today, Greggs shares look pretty cheap from a valuation perspective. Currently, the price-to-earnings (P/E) ratio here is about 13 – a relatively low earnings multiple for a high-quality business. But there are reasons for the low multiple. One is that Greggs’ recent performance has been pretty poor.

As a result of weak levels of consumer spending, changing eating habits (due to GLP-1 weight-loss drugs), and higher costs, the company’s posted a number of profit warnings. These have led to a downward valuation re-rating for the shares.

Note that earlier this month, the company told investors that profit for 2026 is likely to be flat year on year (sending the share price down about 7%). It blamed low consumer confidence for the underwhelming outlook along with costs related to its supply chain.

Long-term potential?

Is there scope for an improvement in performance and a pickup in the share price in the long term? I think so. Lower interest rates in the UK could free up disposable income. Meanwhile, menu enhancements (eg more focus on protein) could help to boost the appeal of its offering.

That said, I’m unconvinced that now’s the best time to consider buying here. The reason why is that the stock’s ‘short interest’ is extremely high. This means that many financial institutions are betting that the shares will fall from here.

These institutions obviously see further share price weakness ahead (expecting more weak trading updates throughout 2026).

Better opportunities in the market?

I’ll point out that short sellers (those who bet that stocks will fall) don’t always get it right. But they quite often do, as they tend to do a lot of research.

Personally, I’ve been burnt by heavily-shorted stocks in the past. So I’ll be steering clear of Greggs shares for now. In my view, there are better shares out there to consider buying.