At first glance, Greggs (LSE: GRG) looks like a real bargain to me. But the share price has lost 25% in a year — and still a lot of investors are betting against Greggs shares by ‘shorting’ them. That means that they are selling future contracts for Greggs shares now (that they may not own) in the hope they can buy them back even cheaper in future.

As an investor rather than a speculator, shorting is not my game. But the amount of so-called smart money shorting Greggs shares has made me wonder whether I am missing something here.

Part of the road to success as an investor, after all, lies in genuinely looking at the risks in an investment case, not just the potential rewards.

Greggs faces multiple challenges

There are, in fact, quite a few risks to the Greggs investment case at the moment, as I see it.

The sausage roll maker has built its business thanks to people having a taste for its keenly priced savoury snacks as well as more traditionally sugary fare. But appetite suppression drugs could take a bite out of the business.

With thousands of shops already, customers could get Greggs fatigue. If regular customers start buying even just some of their lunchtime meals elsewhere, that would be a risk to revenues and profits.

With its large workforce, Greggs has been facing a higher bill due to rises in National Insurance and wage levels. It has pushed through some price rises lately. Although modest, those rises could still make some shoppers think twice before buying.

An unexpected profit warning last summer based on having a mismatch between products and weather also raised doubts in my mind about the quality of Greggs’ current management.

Demand planning for a retailer with a relatively small number of product lines, like Greggs, ought to be fairly basic stuff to get right.

Here’s why I’m holding on

But while the risks are real, I think it is important to maintain perspective.

Coming at this from first principles, people need to eat. For many workers or those out on the go, they want an option to eat food without having to prepare it themselves, but are looking for good value.

What are their options?

Compared to many fast food purveyors, Greggs can seem like a relatively healthy offering. The price is attractive and a huge network of shops means that it is often an easy place to get to.

While variety is limited, I think it feels like there are more options at a Greggs than is the case at some fast food rivals.

With decades in the trade, Greggs has honed its business model, squeezing out efficiencies and building economies of scale. It has successfully created a brand that is now top of mind for many people when it comes to a quick and fairly cheap bite to eat.

This looks like good value

Given that, I think the price-to-earnings ratio of 12 looks like good value for Greggs shares.

I see Greggs as a solid company that merits a higher share price and hope that will happen over time.

I recognise the risks. But I think the current share price already offers me a margin of safety when considering them.

I plan to hang onto my Greggs shares.