Greggs (LSE:GRG) shares have taken a beating since the pandemic. I don’t have a high street bakery chain in my portfolio, but I’d like to. Now I’m wondering if it’s a good time to buy.

Over the last two years, the Greggs share price has increased by 47.1%. The shares would turn a £10,000 investment into £14,710. Once dividends are taken into account, the total will be closer to £15,500.

Of course, in hindsight, we could all be millionaires. Greggs shares have fallen recently. Over the last 12 months, they have increased by just 2.93%. In the same period FTSE250 overall increased by 5.72%.

Investors love Greggs judging by our website traffic, but here’s the problem. Maybe they love it a little too much.

FTSE 250 growth stocks

There’s certainly a lot to like. The year 2023 has seen “another year of rapid growth and great progress”, in the words of CEO Roisin Currie. Total sales rose 19.6% to £1.81 billion as Greggs expanded its store network to over 3,000. It also sold more on a per store basis, with comparable sales up an impressive 13.7%. Pre-tax profit increased by 13% to £167.7 million.

In October 2021, it announced an ambitious plan to double sales in five years and has made a forceful start. If he disappoints, the reaction can be brutal, which brings me to the point I mentioned.

Shares are a little more exorbitant. Trading at 22.34 times earnings is 70% higher than the FTSE 250 average of 13.1 times. The markets have priced in a massive boost there. If this doesn’t happen, the share price could take a hit.

I’m quite bullish about Greggs’ prospects. Now it is the showcase of the main streets. It has survived the pandemic and thrived during the cost of living crisis. As a purveyor of budget-friendly treats, it stood to benefit when customers began to decline.

The stock could do even better if people had a little more cash to spend. Although there is a danger that they could replace it with something more exorbitant.

It also pays dividends

Greggs is not only about development. This also pays off. Although the yield is just 2.21%, management has worked tough to reward shareholders after being forced to forego shareholder payouts during the pandemic. Here’s what the charts say.

Chart by TradingView

The board increased the 2023 dividend by 5% from 59p to 62p per share and also paid a special dividend of 40p. It could easily afford this as net cash from operating activities after leasing fees increased by 29% to £257 million.

However, I don’t think it’s the right time for me to buy Greggs today. Such a high valuation seems to suggest that its shares have gone as far as they can go for now. They have been idling since full-year results were released in March. Investors may have gotten a little carried away.

There is also a risk that all messages about vigorous eating and processed foods will eventually reach their recipients. Greggs’ ironic cult status can now be factored into its valuation. But what if buyers decide the joke is no longer humorous? I wouldn’t want to own shares if tastes changed, and I wouldn’t buy them. Today I can find better value in the FTSE 250.