Toast TOST shares have skyrocketed 131.1% year to date, outperforming the Zacks Computer and Technology sector’s appreciation of 29.8% and the Zacks Internet Software industry’s return of 35.1%.

TOST shares have outperformed industry peers like Innovid CTV, 8x8 EGHT and Five9 FIVN. Over the same time frame, Innovid shares have soared 102.7%, while 8x8 and Five9 shares have lost 18.3% and 47.6%, respectively.

TOST’s strong performance can be attributed to its expanding product offerings, improving market share, and increasing restaurant locations and footprint by entering new market domains.

In the third quarter of 2024, TOST reported revenues of $1.31 billion, which rose 26.5% on a year-over-year basis and beat the Zacks Consensus Estimate by 1.4%. Non-GAAP earnings of 7 cents per share surpassed the Zacks Consensus Estimate of 1 cent.

YTD Performance

Image Source: Zacks Investment Research

The trend is expected to continue over the long haul. For the fourth quarter of 2024, TOST’s non-GAAP subscription services and financial technology solutions gross profit is likely to be $370-$380 million, indicating year-over-year growth of 32-35%. Toast anticipates an adjusted EBITDA of $90-$100 million.

For 2024, TOST expects an adjusted EBITDA of $352-$362 million. Non-GAAP subscription services and financial technology solutions gross profit is expected to be $1.395-$1.41 billion, indicating year-over-year growth of 32-33%.

With such impressive growth prospects, let us dig deeper to find out whether this is the right time for investors to start buying Toast’s stock.

Expanding Product Portfolio Aids TOST’s Prospects

Toast has been benefiting from expansions and product innovation. Its branded app offers features like digital ordering, delivery and loyalty programs, enabling smaller restaurants to compete with larger, established brands.

The company’s SMS marketing solution drives guest engagement and boosts top-line growth. A notable example from the third quarter of 2024 is Spaghettini — a full-service Italian restaurant in California, which recorded $11,000 in sales to SMS marketing within its first month of implementation.

In the fall of 2024, Toast released more than a dozen updates across its product suite, including enhancements to Toast Now, benchmarking tools, kiosks, Toast Tables and payroll.

TOST’s vertical SaaS strategy is focused on releasing unique restaurant-first capabilities, with updates to products like Toast Now, benchmarking tools and kiosks.

Toast has been expanding its footprint into different markets. It has entered grocery and convenience stores by accepting EBT/SNAP benefits, unlocking a large addressable market. Increased investments in the U.K., Ireland and Canada are expected to improve international revenues.

In the enterprise market, TOST has a rich partner base, including Marriott, NTY Group and NBCUniversal. Toast’s prospects are further strengthened by new partnerships with large-scale chains like Potbelly Sandwich Works across the latter’s 400-plus locations.

TOST’s Earnings Estimates Trend Upward

The Zacks Consensus Estimate for Toast’s fourth-quarter 2024 earnings is pegged at 6 cents per share, up 5 cents over the past 30 days.

The consensus mark for fourth-quarter 2024 revenues is pegged at $1.31 billion, indicating 26.45% year-over-year growth.

The Zacks Consensus Estimate for TOST’s 2024 earnings is pegged at 2 cents per share, up 12 cents over the past 30 days.

The consensus mark for 2024 revenues is pegged at $4.93 billion, indicating 27.60% growth from the figure reported in 2023.

Toast’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 210.65%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Toast’s Shares Trading at a Premium

TOST shares are not so cheap, as suggested by a Value Score of F.

The stock is currently trading at a premium, with a forward 12-month Price/Sales of 3.31X compared with the industry’s 3.06X.

Price/Sales Ratio (F12M)

Image Source: Zacks Investment Research

What Should Investors Do With TOST Stock?

The company benefits from a strong portfolio, a rich partner base and an expanding clientele. Its strong growth prospects justify its premium valuation.

Toast’s shares have been trading remarkably above the 50-day and 200-day moving averages, indicating a bullish trend.

Toast Shares Trade Above 50-Day & 200-Day SMA

Image Source: Zacks Investment Research

TOST currently sports a Zacks Rank #1 (Strong Buy) and has a Growth Score of A, a favorable combination that offers a strong investment opportunity, per the Zacks Proprietary methodology. You can see the complete list of today’s Zacks #1 Rank stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Innovid Corp. (CTV) : Free Stock Analysis Report

8x8 Inc (EGHT) : Free Stock Analysis Report

Five9, Inc. (FIVN) : Free Stock Analysis Report

Toast, Inc. (TOST) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research