It has been a disappointing time for shareholders in Greggs (LSE: GRG). Since the turn of the year, Greggs shares have fallen 11%.

Over five years, the share price has slumped by almost a third. Yes, there is a 4.6% dividend yield. But the dividends would not leave an investor even over the past five years, given the scale of the share price decline.

So it may come as a surprise that I think Greggs has a lot going for it, so much so that I have repeatedly bought the shares over the past year.

Here is why I think an investor ought to consider Greggs.

Not running like a finely tuned engine

In some ways, the baker has had a disappointing run when it comes to its operations and financial performance.

Last summer, for example, it issued a surprise profits warning after it misjudged customer demand during a hot spell of weather. That seems like a fairly basic management mistake to me.

Costs have been growing due to factors like higher National Insurance costs. Last year’s underlying operating profit fell – and statutory profit after tax declined even more, by 18%.

However, it feels to me as if the stock market is more focussed on Greggs’ short- or medium-term challenges than on the long-term growth story.

Does the market reflect how Greggs is doing?

Last year, for example, total sales grew 7%. A lot of that came from opening more shops, but even in existing shops operated by the company, like-for-like sales were up 2%.

Greggs is solidly profitable: last year’s reduced statutory profit after tax means the company’s post-tax profit margin was a very respectable 8%.  

The company is strongly cash generative and is sitting on a net cash position.

Taken together, that mostly sounds pretty good to me. But the market has been focussing more on the negatives, like a perceived sense Greggs is reaching the limits of its growth potential, rather than the positives.

This is not performing prettily right now!

Still, whether I agree with it or not, the market is sending a pretty consistent message when it comes to Greggs shares.

The price is down in the short term (so far this year) but also the long term (the five year number I mentioned above).

Greggs is also one of the most shorted shares in the London market, meaning a lot of traders are selling options in the share even if they do not own it, in the expectation its price will fall further.

So, am I missing something?

Here’s what I’m doing

Maybe.

For example, Greggs reckons there is “a clear opportunity for significantly more than 3,000 UK shops” versus its 2,739 locations at the end of last year. But the City fears consumer fatigue with the brand, reflected in sluggish same-store sales growth. I do see that as a risk.

Another risk is shifting eating patterns. Weight-loss drugs mean that the UK market for prepared takeaway food like Greggs sells could fall.

Speaking of falling, I do think fears like that could mean we see Greggs shares go down even more.

But I am a long-term investor. From a long-term perspective, I see this as potentially badly undervalued. I reckon it is a share investors should consider.