Back in August, I sold roughly half my stake in food-on-the-go retailer Greggs (LSE: GRG) from my Stocks and Shares ISA. As I type, this goes down as one of my better investment decisions. In the last month, the shares have dropped 10% in value.

Is it time for me to increase my holding again or does recent momentum suggest I should consider selling the remainder?

What’s gone wrong?

To a casual observer, a double-digit fall in any share price over such a small period of time suggests that something has gone seriously wrong. But I don’t really think that’s the case. The FTSE 250 member’s latest set of quarterly numbers — revealed on 1 October — still looked pretty tasty to this Fool.

Total sales rose 10.6% over the three-month period to 28 September and like-for-like sales (in company-managed shops) were up 5%. Throw in a bunch of new store openings and cost inflation being at the lower end of expectations and there’s actually a lot to like.

But there’s one thing I didn’t like. And it was exactly the thing I was worried about when I reached for the ‘sell’ button a while back.

No change

Having delivered some more-than-decent figures, management declared that it’s expectations on trading for the full year were unchanged.

Now, this wasn’t bad in itself. It’s quite comforting to know that CEO Roisin Currie and co are confident in their projections. But it’s less than desirable when the shares are flirting with record highs and the valuation is looking punchy to say the least. In such a scenario, I want a company to be blowing the doors off!

And Greggs just…wasn’t.

Top FTSE 250 stock

For the avoidance of doubt, this is still one of my favourite mid-tier UK stocks. It sells low-ticket treats that most people buy out of habit — handy during a cost-of-living crisis. Pandemic-aside, the firm also generates consistently excellent returns on the money invested in the business. This tends to compound shareholders’ money over time.

The problem is that these attractions aren’t a secret. Indeed, they help explain why the Greggs share price was on a roll for much of last year and 2024.

It also helps to explain why the stock still trades on a forecast P/E ratio of 21. That’s not as high as it once was. But it’s still pretty punchy for a company in the Consumer Cyclicals sector. It’s also quite worrying considering just how volatile the price has been in the last five years.

Staying patient

To return to my original set of questions, I’m not thinking of selling my remaining holding in the company. Taking into account the aforementioned attractions and the ongoing investment into its supply chain (redevelopment/extension of distributions centres and a new frozen product manufacturing and logistics facility), I think the long-term outlook remains positive.

On the other hand, I’m also not rushing to buy back my shares just yet. Without a sense that earnings guidance might be about to send analysts scrambling back to their calculators, I’m concerned the price might drift for a while (or worse).

If Greggs shares become a screaming bargain, I’ll definitely reconsider. But I don’t think we’re there yet.