At one point, Greggs‘ (LSE: GRG) shares looked a solid investment. Sales were growing, the company had a proven, cash-generative business model and the scope for growth seemed huge.

In recent years though, things have looked less rosy. Greggs’ share price is down 16% over one year – and 31% over five.

Sure, there is still a meaty 4% dividend yield to help keep investors sweet. But the long-term price fall and value destruction is a real cause for alarm.

What has happened – and could Greggs’ shares bounce back?

A business that’s faced many challenges in recent years

One dent in the Greggs’ story came with the pandemic. Suddenly its low-tech business model reliant on thousands of physical locations came to look like a potential liability more than an asset. Shops were shuttered, cash flows tumbled and the dividend was suspended.

While those days are well behind us, I think they undermined many investors’ longstanding confidence in Greggs. The episode pointed up a fragility in the business model that remains a standing risk today.

Then there is the question of how much Greggs is too much?

The company has continued its onwards march of shop openings. It ended last year with over 2,700 and reckons that there is potential for well over 3,000 in the UK over time.

But the novelty factor has long since worn off while regional rivals like Bayne’s are nipping at Greggs’ heels. Trends including shifting working patterns and weightloss drugs have combined to reduce demand for hot pastries among some consumer groups.

Changing weather patterns can reduce demand for hot pastries too. A shock profit warning last summer not only flagged that as a risk, but also raised questions about whether Greggs’ management had the right skills in demand planning to meet what customers want and when they want it.

On top of that, all those shops need a lot of staff. Wages and National Insurance prices going up in the past few years has added costs. That is an ongoing risk, as are elevated power prices for the energy-hungry baker.

Here’s where a long-term view can help an investor

Stepping back though, many of those strike me as short-term problems. That is not to underrate their impact. But they can be fixed, in my view.

I am a long-term investor. While Greggs has plenty of short-term challenges, I do not think it is holed beneath the waterline as a business.

In fact, I think it is in pretty good shape. Its offer and value proposition are unique and attractive – no small feat for a purveyor of simple fare like sausage rolls.

The relatively affordable prices mean that, even if costs rise, Greggs has capacity to pass them onto customers in the form of higher prices, without necessarily giving up its competitive edge.

What I think is the biggest issue is demand. Are people turning away from Greggs?

The evidence suggests not. Total sales last year grew a healthy 7%. That was largely driven by shop openings, but notably like-for-like sales in company-owned shops grew 2%.

To me that suggests that Greggs’ appeal remains. Priced at 14 times earnings, I see it as a share for investors to consider.

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

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Christopher Ruane owns shares in Greggs.