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Since going public at $40 per share in September 2021, toast‘s (TOST 1.26%) Stock prices are significantly below the market. The company has fallen more than 50% from its IPO valuation, but S&P500 (^GSPC 0.18%) The index rose 6% over the same span. In its first year on the market, Toast’s stock price fell by as much as 70% in 2022 due to volatile market conditions, especially high-growth stocks with little profit, and the stock price fell while many other tattered stocks soared. It remained.
But nervous selling by one shareholder could create a buying opportunity for others. In this case, providers of cloud-based business tools for restaurants of all kinds are ready to run from this bargain-bin starting point.
Let me explain the three best reasons to consider adding Toast stock to your portfolio today.
Image source: Getty Images.
Toast is growing in key places
Bearish investors might want to take a look at Toast’s negative earnings and free cash flow over the last twelve months, before moving on to the next idea. This is a deal breaker for many value-oriented stock buyers. For example, I certainly don’t expect classic values wizard Warren Buffett to invest in Toast anytime soon.
But business is moving in the right direction.
- Recently reported third-quarter 2023 revenue increased 37% year-over-year. Quarterly sales for the first time exceeded $1 billion.
- Toast’s net loss for the quarter was just $31 million, less than a third of its $98 million loss in the same period last year.
- Free cash flow went from an outflow of $80 to an inflow of $37 million.
And this bullish trend is likely to continue for some time. For example, management raised its full-year forecast for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) from approximately $25 million to approximately $43 million.
So Toast may not yet be classically profitable, at least on a sustained basis, but sales are skyrocketing and margins are heading into positive territory. That’s definitely good news.
TOST Revenue (TTM) Data by YCharts
The company solves complex industry problems
Toast’s restaurant management system was designed to streamline and improve restaurant operational efficiency. And your entire business starts with Toast’s powerful cloud-based software. 2021 Co-Founder and President Steve Fredette Unlike many small tech startups that seek quick returns with flimsy business plans, Toast is focused on substance over hype. he said.
We aim to simplify the complexity of restaurant management by integrating point-of-sale (POS) services, digital ordering, and customer relationship management into a single platform. The system helps manage day-to-day operations and provides valuable insights through data analysis, allowing restaurant owners to make informed business decisions. For example, actual sales trends are directly reflected in your next marketing campaign.
Most restaurants use tools from a variety of vendors (sometimes even basic spreadsheets) to manage these functions, but it’s difficult to make them work together. Toast makes it easy to run your restaurant business from a single cloud-based platform.
Additionally, Toast’s adaptability allows it to accommodate a wide variety of restaurants, from small cafes to large multi-store establishments. So far, most of the customers have been small local restaurants, but Toast has also gained larger customers over time.
The company solves many difficult problems in large industries. According to a recent analysis by Fortune Business Insights, the global food service market’s revenue is expected to reach $2.3 trillion in 2022 and grow to $5.4 billion by 2030.
Just a small portion of that huge opportunity could quickly turn Toast into a global giant.
The stock is found in Wall Street’s bargain bin.
Despite encouraging financial trends and an equally exciting market position, investors have yet to buy into Toast’s long-term growth story. We looked at the bearish price trend earlier, and the stock has fallen an additional 7% over the past 52 weeks. It trades at just 2.7 times sales, which is a bargain given its rapid revenue growth and improving margins.
Making money in the stock market often requires finding tomorrow’s giant companies before the average investor does. Toast isn’t perfect yet, but sales are skyrocketing and profit metrics should follow as the company leverages significant economies of scale.
Low prices, by themselves, are not a strong “buy” signal. However, Toast combines a modest stock price with bullish business trends and a top-notch business plan. The short answer is that the window to buy Toast stock is currently wide open.
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