Numbers

The Numbers

Greggs compounded revenue from £238M in 1996 to £2.15B in 2025 with net margins that, until this year, rarely left a 6–9% band — a remarkably durable bakery franchise built on company-owned vertical manufacturing. The stock has since been cut in half from its £33 peak because three things reversed at once in FY2025: a capex program that has doubled depreciation while FCF collapsed, an operating margin that slipped from 9.7% to 8.7%, and a net-cash cushion that has all but disappeared. The single metric most likely to rerate the stock is FY2026 operating margin — if management holds the 9%+ line while the new supply-chain capacity starts absorbing volumes, the multiple reopens; if margins drift again, this stays a value trap.

A. Snapshot

B. Quality scorecard — is this a business that survives?

The profile is a strong-moat retailer that is starting to show wear: growth and profitability still score top-decile, but balance-sheet strength has fallen into the 6/10 range as capex outpaces cash generation, and momentum is in the bottom third after a year of earnings downgrades. Altman Z of 3.5 still says "safe" — but it was above 7 as recently as FY2019 and is now the lowest since the financial crisis.

C. Revenue and earnings power — 20-year view

Revenue roughly tripled in the last decade and doubled since the pandemic — store count plus ticket growth. Operating income reached a new high in FY2024 at £195M but softened to £187.5M in FY2025, the first absolute decline in a non-pandemic year since 2013.

The FY2025 net margin compression (7.62% → 5.68%) is the sharpest ex-COVID move in the series — driven by higher D&A from the supply-chain build-out, rising interest expense on lease liabilities, and a tax rate that stepped up to 27%. Operating margin slipped less (9.70% → 8.72%) but is still the lowest since FY2018.

Recent half-yearly direction

Revenue still grew 6.8% in FY2025 — but H1 net income fell 16% year-over-year, and H2 gave back 23%. That's where the story broke: volume held, but cost leverage didn't.

D. Cash generation — are the earnings real?

Operating cash flow keeps setting new records — £337M in FY2025, a 5-year high — even as reported earnings slipped. That's IFRS 16 optics (lease payments sit below the OCF line) plus working-capital inflows; the usable cash story lives in free cash flow below.

This is the chart that explains most of the derating. Capex has quadrupled in four years — from £54M in FY2021 to £285M in FY2025 — as Greggs opens the Derby and Kettering distribution centres and expands Balliol Park and Amesbury. FCF has collapsed from £231M (FY2021) to £52M (FY2025), the lowest non-pandemic level in a decade. Trailing 5-year FCF/NI conversion is roughly 82% — still acceptable, but pre-2022 that number averaged above 110%.

E. Capital allocation

Greggs has been a disciplined but modest cash returner — a steady ordinary dividend plus occasional large specials (£40.9m paid as part of the £98m FY2022 distribution, and £56m of the FY2024 £107m). Buybacks are symbolic. The notable shift in FY2025: zero buybacks, and £25M of gross new debt to fund capex — the first external borrowing in the data series.

F. Balance sheet health

Cash has fallen from £199M at the post-pandemic peak to £71M, and the company took on its first external debt in the modern era during FY2025. Altman Z is still comfortably in the safe zone (above 3) but has dropped every year since 2021 — this is a genuine trajectory, not a blip.

G. Valuation — now vs its own 20-year history

The decisive chart. EV/EBITDA of 6.1x is a full 1.8x below the 20-year mean of 7.9x and well under the 5-year mean of 9.2x. On P/E the gap is similar — 14.1x vs 17.1x long-run average. The stock is now priced cheaper than at any point since the global financial crisis, outside of 2008 itself. That is either the right price for a business whose capex intensity has permanently stepped up, or a deep cyclical bargain.

H. Peer comparison

Greggs is the clear ROIC leader of this UK-listed food-service cohort at 10.5% alongside Compass — but trades at a far cheaper EV/EBITDA than Compass (6.1x vs 13.2x) and Whitbread (9.6x). Only Wetherspoon and Dominos sit lower, and both carry weaker margin structures and higher leverage (Net Debt/EBITDA 4.5x and 3.8x respectively).

Quality vs value — peer positioning

Upper-left is where you want to buy. Greggs and Dominos are both reasonably priced high-ROIC operators; Compass is the quality play but expensive; Whitbread is the value trap. Greggs is priced more like JDW (a lower-return pub operator) than like the best-in-class food-service peers — which is exactly the valuation gap worth closing.

I. Fair value and scenarios

Three independent lenses converge on a £20–£32 range:

1. Fair Value model (12-month): £34.57 — assumes a modest normalisation of margins and continued 6–8% top-line growth.
2. EV/EBITDA reversion: at the 20-year mean of 7.95x and FY2025 EBITDA of £345M, EV is £2,744M. Subtracting the £25M of bank debt and capitalising £70.8M of cash yields equity value of about £2,790M, or roughly £27.2/share — 66% above the current price.
3. FCF-based floor: at FY2025 FCF of £52M and a 5.5% required yield, equity is worth only about £940M or £9.2/share. This is the bear case if capex doesn't normalise.

Current £16.43 sits between bear and base — the market is pricing in that capex stays structurally elevated and margins stabilise at the FY2025 level, but not that either tailwind reasserts. The asymmetry favours the upside if FY2026 margins re-expand to the 9.5%+ region.

What the numbers say

The numbers confirm that Greggs is still one of the best-run UK consumer businesses by the measures that matter long-term: 20%+ ROE, 60%+ gross margin sustained for two decades, Altman Z still in the safe band, and a revenue base that has never meaningfully gone backwards outside a pandemic. They contradict the popular "structurally broken" narrative that drove the share price from £33 to £16 — cash flow from operations hit a record high in FY2025, the dividend was maintained, and the Fair Value discount is the widest in a decade. What to watch next: the H1 2026 operating margin print. If it lands above 9% with flat-to-down capex guidance, the multiple should close half the gap to the 20-year mean within twelve months; if margins drift lower while capex stays above £250M, the bear case at £9–10 becomes live.