Greggs‘ (LSE:GRG) shares are on fire at the moment. They’re up almost 30% in the past year.

So should I buy a British takeaway retailer for my portfolio? Let’s discuss.

Why is the price rising?

It’s uncomplicated to see why the stock has done well. Business performance has been powerful recently. For example, in the first half of 2024, total sales were £906.6m, compared with £844m a year earlier. That’s a year-on-year boost of 7%.

For a successful grocery chain, that’s an impressive level of growth. It’s worth noting that the company increased its interim dividend by 18.8% to 19p per share as a result of these results.

Can it continue to grow?

Of course, the large question is whether the price can continue to rise. Is there room for further gains? Looking at the business and its future plans, I think so (in the long run).

It’s a high-quality company with a well-known, trusted brand and a high return on capital (meaning it’s very profitable). And looking to the future, it plans to open a ton of modern stores (it’s targeting 140 to 160 net modern stores in 2024).

If the growth strategy is successful, the share price should continue to rise.

Are stocks inexpensive?

That said, the company’s current valuation could limit near-term gains. Greggs shares currently have a price-to-earnings (P/E) ratio of 23.4 on this year’s earnings per share forecast, falling to 21.3 on next year’s forecast.

I don’t think these multiples are unreasonable given the quality of Greggs. But they don’t leave much room for valuation appreciation. In other words, future earnings are likely to be driven by earnings growth.

One problem for me

Now, while I see investment potential here, the problem for me is that I like to invest in companies that seem poised to benefit from powerful long-term trends. And I don’t see any long-term trend that would be good for Greggs.

It would be different if the company focused mainly on robust eating/salads like Tossed in London and Sweet green in the US (I actually think it’s a really captivating topic and I’m looking for ways to implement it).

But now I have trouble seeing a trend that will give the company a boost in the coming years. I also think that the shift to a robust diet could pose a risk for Greggs in the future. Looking at today’s menu, there are many things on there that are not particularly robust.

Don’t get me wrong – I love a steakhouse and a doughnut as much as anyone else. But consumer preferences are changing, and robust eating is definitely becoming more essential.

Better options now?

Given this situation, I will leave Greggs shares on my watchlist for now.

I think this company is attractive from a long-term investment perspective. However, it is not a good fit for my portfolio at this time.