Greggs‘ (LSE:GRG) shares are in an interesting position at the moment. The FTSE 250 stock’s made a bad start to 2025, falling 27% since the start of the year, but there’s more to the story than this.  

The firm’s growth prospects aren’t what they used to be and this is why the share price is down. But while that’s true, the stock’s trading at its lowest price-to-earnings (P/E) multiple in a decade and I think it’s well worth considering right now.

Growth

Theoretically, Greggs has two ways of growing its revenues. The first is by opening more stores and the second is by generating higher sales from the outlets it currently operates. 

Most of the firm’s recent growth has come from increasing its store count, which isn’t a problem by itself. But the trouble is, it isn’t going to be able to keep doing this indefinitely.

Greggs estimates that it can maintain around 3,000 venues, but that’s only 15% higher than the current number. So scope for further sales increases on this front is limited.

The other strategy involves generating higher sales from its existing outlets. And the most obvious way of doing this is by increasing prices, which should also boost margins.

This however, is risky for a business with a brand based on customer value. The company announced a couple of weeks ago that it was raising prices and its customers didn’t react well. 

Whether they will actually look elsewhere – Greggs still offers the best value on the high street – remains to be seen. But it’s a risk that investors need to consider carefully. 

Value

Greggs shares are currently trading at a P/E multiple of 15. And with the exception of the Covid-19 pandemic – when its net income turned negative – this is the cheapest it’s been in a decade. 

Over the last 10 years, the stock’s consistently traded at a P/E ratio of 16.5, or higher. That means if the stock gets back to those levels from today’s prices, the share price could climb by at least 15%.

I think however, that the firm’s limited growth prospects make betting on this risky. Greggs has never had more stores and this means it has never had less scope to grow revenues by opening new outlets.

Instead, I’m looking at the underlying business as an opportunity. At today’s prices, it doesn’t look to me as though much needs to go right for the company to generate good returns for investors.

Even if the store count doesn’t grow beyond 3,000, that’s 15% higher than the current level. And if profits grow at the same rate, the potential for dividends and share buybacks looks attractive to me.

In short, Greggs has gone from being a growth stock to a value stock. Its share price is now largely justified by its existing cash flows, rather than the ones it might generate in the future.

Buying

Greggs might not be able to do much more than offset inflation by increasing prices. But at today’s prices, I don’t think it needs to.

I’m looking to buy the stock next time I have cash available to invest. My hope right now is the stock stays down long enough to give me the opportunity.