3 Reasons You Should Buy Toast Stock Like There’s No Tomorrow

Because we don’t sell consumer-facing products and services, many people may not be familiar with it. toast (TOOST 0.65%), which is considered the operating system of the restaurants it serves. The company sells point-of-sale hardware solutions and offers a variety of software and service tools for accepting payments, managing payroll, setting up loyalty programs, providing loans and more, making restaurant location management easier.

stock of this SaaS companies It is currently trading 72% below its all-time high. But don’t let the market’s punishment discourage you. Here are three reasons why you should consider buying toast like there’s no tomorrow.

Growth is a key part of the story

Toast has experienced remarkable growth since its founding in 2012. Revenue for the third quarter of 2023 (ending September 30) was up 37% year over year and up 112% from the same period two years ago. Despite macroeconomics Despite headwinds such as high interest rates and inflationary pressures, Toast continues to grow vigorously.

That’s not surprising. The business has developed products and services that are in huge demand in the restaurant sector. This shows that Toast is solving an important problem: how complex and difficult it can be to find back-end solutions from multiple providers to run a restaurant better. Toast’s all-in-one and end-to-end products make life easier for owners and managers.

Toast currently has a customer base of 99,000 restaurants, which accounts for over 10% share in the US, so the total market size it can penetrate is enormous. There are 860,000 restaurants in the United States and 22 million worldwide. Moreover, it is estimated that restaurants will spend $55 billion on technology efforts in the United States. That means Toast’s $4 billion in annual revenue represents a tiny fraction of the overall market.

With new features constantly being introduced, it’s easy to see that Toast will continue to provide attractive offers to existing and new users. And this will lead to strong growth in the coming years.

An economic moat exists.

not economic moat A set of characteristics that enable a particular business to outperform its competitors and prevent new entrants from entering the industry. Typically this is only seen in more established companies. That’s why it’s surprising that Toast is already showing signs of having an economic moat.

More specifically, the company benefits from switching costs. The decision for a restaurant operator to switch to another service provider must be a difficult one considering the potential disruptions that can occur on a daily basis.

Toast’s rapid growth to date shows that it is providing a valuable service to its customers. Once a restaurant’s managers and employees become familiar with Toast’s hardware and software and see how seamless and beneficial it is, they are unlikely to be willing to switch to a competitor. This lock is very important to Toast.

The company can also build a well-known brand within the industry. Toast noted that 20% of its new customers come through referrals. Again, this shows just how fantastic Toast’s product offering is. But more importantly, it can help reduce your business’s marketing costs over time. And this can generate lasting profits in the future.

Favorable settings for investors

Investors remain pessimistic about Toast, as its stock price is well below its all-time highs. It also doesn’t help that the stock is up only 1% in the last year. Nasdaq Composite The index soared 43%.

As a result of this poor performance, the stock currently trades with a price-to-sales ratio of 2.7. This is a huge discount compared to Toast’s historical average value. And this provides investors with a very favorable environment to purchase competitive companies at low prices.