Greggs (LSE: GRG) shares are trading at around £17.37, but one analysis suggests the bakery chain’s stock could be worth significantly more.
A discounted cash flow valuation using a 9.5% discount rate places Greggs’ fair value at £34.06, implying the shares are currently 49% undervalued.
That gap between price and fundamental value is attracting attention from investors looking for long-term upside in the UK market.
The company published its full-year 2025 results on 13 April, reporting record sales of £2.151bn driven by steady like-for-like growth of 2.4%.
Greggs also opened 121 net new shops during the period, reinforcing its position as Britain’s biggest fast-food chain by outlet count.
Higher-traffic formats including travel hubs and retail parks delivered strong results, while digital channels such as click and collect continued to grow their contribution.
Business-to-business revenue rose 9.2% to £254m, powered by growing momentum in grocery and franchise partnerships across the period.
Analysts currently forecast earnings growth averaging 14.2% annually over the medium term, providing a solid foundation for any longer-term valuation case.
Rising input costs, from ingredients through to wages, remain a risk that could squeeze margins if not managed carefully by the business.
Increased competition in the food-to-go market also presents a challenge that could limit pricing power and put pressure on profitability over time.
Despite those risks, the combination of expanding store formats, digital growth, and a resilient consumer base points to a business building genuine long-term scale.
In discounted cash flow analysis, future cash flows are forecast and discounted back to the present, with more uncertain forecasts requiring a higher discount rate from investors.
The principle that asset prices tend to converge toward fair value over time is what makes identifying undervalued stocks such a potentially rewarding strategy for patient investors.
For investors willing to look past short-term cost headwinds, the growth momentum and strategic footprint expansion suggest Greggs’ long-term story remains firmly intact.
