Toast Inc (TOST, Financial), a prominent player in the software industry, has demonstrated a notable performance in the stock market recently. With a current market capitalization of $14.99 billion and a stock price of $27, Toast has experienced a 2.01% gain over the past week and an impressive 15.20% gain over the past three months. According to GuruFocus, the GF Value of Toast Inc is currently $28.39, indicating that the stock is fairly valued. This valuation is based on historical multiples, past performance adjustments, and future business estimates.
Company Overview
Toast Inc, based in the United States, offers a comprehensive suite of technology solutions tailored for the restaurant industry. These include point-of-sale (POS) systems, payment processing, and various software services. As of March 2024, Toast serves approximately 112,000 restaurant locations across the U.S. The company's diverse revenue streams include software subscription fees, transaction-based income, loan origination, and servicing fees from Toast Capital, as well as hardware installation and professional services. In 2023, Toast processed about $126 billion in gross platform volume, showcasing its significant impact on the restaurant technology sector.
Assessing Profitability
Despite its expansive market reach, Toast's financial health, as indicated by its Profitability Rank, remains low at 1/10. The company's Operating Margin stands at -5.10%, which is better than 33.59% of its peers in the industry. Additionally, Toast's Return on Equity (ROE) and Return on Assets (ROA) are -21.67% and -13.14% respectively, positioning it better than 22.1% and 24.24% of industry counterparts. The Return on Invested Capital (ROIC) is -35.96%, surpassing 15.08% of competitors. These metrics highlight the challenges and competitive nature of the industry, as well as areas where Toast may need to improve to enhance profitability.
Growth Trajectory
Toast Inc has shown remarkable growth, with a 3-Year Revenue Growth Rate per Share of 59.60%, ranking better than 94.4% of 2,465 companies in the software industry. The company's estimated Total Revenue Growth Rate for the next 3 to 5 years is 23.50%, which is superior to 85.39% of its peers. However, its 3-Year EPS without NRI Growth Rate is only 2.10%, better than 36.79% of the industry. This indicates that while Toast is expanding its revenue significantly, translating these gains into net income remains a challenge.
Notable Shareholders
Toast's investor base includes prominent figures such as Al Gore (Trades, Portfolio), who holds 5,755,568 shares (1.04% share percentage), Catherine Wood (Trades, Portfolio) with 2,624,364 shares (0.48% share percentage), and Paul Tudor Jones (Trades, Portfolio) who owns 602,985 shares (0.11% share percentage). These holdings reflect confidence from high-profile investors in Toast's business model and future prospects.
Competitive Landscape
Toast operates in a competitive environment with key players like UiPath Inc (PATH, Financial) with a market cap of $7.33 billion, Confluent Inc (CFLT, Financial) valued at $8.44 billion, and Dropbox Inc (DBX, Financial) at $7.31 billion. These companies, while in the same industry, offer different but overlapping technologies which could affect Toast's market share and growth trajectory.
Conclusion
In conclusion, Toast Inc's recent stock performance and growth trajectory position it as a noteworthy contender in the software industry, particularly within the restaurant technology sector. Despite facing challenges in profitability and EPS growth, the company's substantial revenue growth and strategic market positioning underscore its potential as a solid investment. Investors should keep an eye on how Toast leverages its technology and market position to improve profitability and shareholder value in the competitive landscape.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
