Trading conditions on the high street are tough and Greggs also has to fight against rising raw material costs. However, for three main reasons, Questor in the Daily Telegraph believes it is a company worth backing. Firstly, Greggs is investing through the challenging market. Capital expenditure was £30.3m in 2009, £45.6m last year and should be £60m in 2010. The business is continuing to expand into areas other than the traditional high street such as industrial estates, transport hubs, and even football grounds. Secondly, Greggs' reputation for "value" is vital amid economic uncertainty. The final factor Questor is attracted to is that, by producing much of what its sells, Greggs has a greater control over rising food prices. Greggs was first tipped by this column in August 2009 at 400p and the shares are now 17% higher, compared with the FTSE 100's 20% rise over the same period. On 2011 forecasts Greggs is trading at 11.8 times earnings, moving to 10.4 for 2012, and a yield of 45. The forecasts are not that challenging, Greggs is predicting only "marginally positive" like-for-like growth for 2011 – the same as last year. So far in 2011, like-for-like sales are up 0.4%. Shares in the bakery chain could be the offering the same value as its breakfast rolls. Buy.
Daily Telegraph, Money p76
