The love affair UK investors had with Greggs (LSE: GRG) shares came to a crashing halt early in 2025. A Q4 trading update in January that year showed sales growth slowing, especially in like-for-like sales. And the company’s outlook wasn’t exactly sparkling. The share price slumped.

Greggs shares are now down more than 50% from their 52-week high, set in 2021 when growth investors were in full buying mode. But I don’t see anything fundamentally wrong with the company. And I think we coud be looking at a long-term bargain here, after a needed reset.

Mood swing

Let’s face it, a price-to-earnings (P/E) ratio above 20 is generally reserved for hot growth stocks — in the UK, at least. But that’s where Greggs shares were trading before they fell.

And, well, Greggs sells baked good and sandwiches, and things like that. Unless someone invents a way for sausage rolls to power the AI explosion, I just can’t see Greggs ever being worth a tech-like growth valuation.

But Greggs does one thing well, and I could see it powering wealth gains for investors for years to come. Greggs generates cash pretty handily. In the 2025 year, the company saw net operating cash inflow (after lease payments) of £273.7m (up from £261.9m the year before).

Greggs maintained its 2025 dividend at 69p per share. And the same again this year would mean a dividend yield of 4.2% on the current share price. That might not sound brilliant. But 2025 saw capital expenditure reach a peak, and it’s expected to fall to a figure around 45% lower from 2027 onwards.

Predictions

Going on the latest analyst forecasts, this all means we could be in for a period of dividend growth again. It’s not likely to be astronomical, but steady. It could mean rises of around 3% to 4% per year. And that should be enough to beat long-term inflation.

Over that period, we could see the Greggs P/E fall from an expected 13 for the current year, to 11.5 by 2028. And that seems a lot more reasonable to me than the unsupportable heights the valuation reached in recent years.

I also think Greggs deserves something of a safety premium. It’s not the most glamorous retail stock around. But customers do seem to keep coming back, year after year.

Out of favour

Saying that, there’s no denying investors have turned away from Greggs. And the way sentiment goes in the stock market, it might be some time year before we see much sign of new optimism. Until then, I reckon Greggs shares could remain in the doldrums. I can see it maybe taking a couple of years.

But for me that means we could see buying opportunities continuing for some time yet. I rate Greggs as one investors should consider topping up from time to time, while the shares remain out of fashion.