It’s fair to say that Greggs‘ (LSE: GRG) shares have been a poor investment over the last two years. Over this time frame, they’ve lost about 40% of their value meaning that a £5,000 investment 24 months ago is now worth about £3,000 (ignoring dividend payments).

Could there be an opportunity here for value hunters today? Let’s take a look at the set-up.

A solid update in May

Greggs’ most recent trading update, posted on 12 May, was pretty solid. For the first 19 weeks of 2026, like-for-like sales were up 2.5% year on year. Notably, growth in the latter 10 weeks of that period was 3.3% higher. In other words, business performance had picked up.

In the update, the company said that partnerships with franchisees and grocery retailers are progressing well. These partnerships are contributing to the growth in overall sales.

Management also advised that forward buying of key commodities should provide protection against increased inflation in the near term (it noted that if the situation in the Middle East continues it’s likely to see higher overall cost inflation through the end of 2026 and into 2027). So overall, it was a decent update with no major red flags.

Two big risks

Looking beyond this update however, there are a few issues to be aware of with this stock. One is that weight-loss drugs could slow growth in the years ahead.

One firm that’s concerned about this risk is Jefferies. Its analyst Andrew Wade recently downgraded Greggs from a Buy to a Hold (and lowered its price target to 1,610p) due to concerns that high-spending customers may start to cut back (eg maybe they’ll buy two sausage rolls instead of three).

Another issue on the negative side is that short sellers are aggressively targeting the shares. In other words, institutional investors expect the shares to fall further.

Personally, I don’t like to bet against the short sellers because they tend to do their research. They don’t always get it right, but quite often they do.

The valuation and dividend yield

As for the valuation, it’s lowish but not super-low. Looking at earnings forecasts for this year, the price-to-earnings (P/E) ratio is about 13.3.

At that multiple, I see scope for an upward re-rating if operational performance continues to improve. However, if business performance deteriorates, I could see the valuation falling.

Turning to the dividend yield, it’s relatively attractive. At present, it’s about 4.2% looking at the dividend forecast for 2026. Dividend coverage is expected to be about 1.8 times. So the payout looks pretty secure.

Is there an opportunity here?

Putting this all together, it’s a tricky stock we have here. With growth picking up and the valuation at relatively low levels, there are reasons to be bullish.

However, with weight-loss drugs clouding the outlook and short sellers targeting the stock, there are also reasons to be bearish. So it’s not an easy call.

Personally, I feel that there are better shares to consider buying today, given the risks. But the shares could be worth considering if an investor is bullish on Greggs’ long-term outlook.

Should you invest £5,000 in Greggs Plc right now?

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Edward Sheldon does not hold any positions in the companies mentioned