Toast TOST shares have surged 43.8% over the past six months, outperforming the Zacks Computer and Technology sector’s appreciation of 2.4% and the Zacks Internet - Software industry’s return of 10.9%.

TOST shares have been riding on a strong portfolio, expanding market share and the increasing number of restaurant locations. Toast is extending its footprint by entering new market domains.

TOST’s rich partner base includes the likes of Marriott International MAR, Amazon, NTY Group, Uber Technologies UBER and Comcast. Toast has recently expanded its partnership with Uber, integrating Toast Delivery Services with Uber Direct to help restaurants across the U.S. save delivery costs and expand reach.

Six Month Performance

Image Source: Zacks Investment Research

Innovative Product Portfolio Drives TOST’s Growth

Toast’s innovative product portfolio is strengthening its position in the market. Its branded app offers features like digital ordering, delivery and loyalty programs, enabling smaller restaurants to compete with larger, established brands. TOST’s SMS marketing solution drives guest engagement and boosts top-line growth.

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. This aligns with TOST’s vertical SaaS strategy, which is focused on releasing unique restaurant-first capabilities to address industry-specific needs.

Toast Capital has emerged as a key catalyst for TOST’s growth. It offers fast and low-friction funding to support restaurant expansion.

An Expanding Client Base Bodes Well for TOST

Toast has shown remarkable success in scaling its presence in the restaurant sector. Over the past three years, it has doubled its market share in the United States, achieving 14% penetration. The Toast platform currently serves approximately 127,000 restaurant locations in the United States.

Toast’s growing client base includes prominent brands like Metro Diner, The Baum Group, Giordano’s Pizza, Peetaway, Potbelly PBPB and Cultivate Food & Coffee. Potbelly is deploying TOST’s solutions across its 400+ locations in the United States.

In the third quarter of 2024, The Baum Group, known for its Speakeasy and Ice Cream Shop, UES, in New York City, relied on Toast Capital to fund the launch of its new concept, Champagne Problems. Cultivate Food & Coffee in Atlanta opened its third location, utilizing a variety of Toast products to boost service speed and accuracy.

Toast has entered grocery and convenience stores by accepting EBT/SNAP benefits, unlocking a large addressable market.

Gangnam Market, a 28,000-square-foot market in Chicago, uses Toast to manage its over $10 million annual sales and 15,000 SKUs, leveraging Toast’s retail-specific and EBT/SNAP features.

TOST’s Revenue Estimates Indicate YoY Growth

For the fourth quarter of 2024, TOST expects non-GAAP subscription services and financial technology solutions gross profit 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%.

TOST’s Earnings Estimate Revisions Show Upward Trend

The Zacks Consensus Estimate for Toast’s fourth-quarter 2024 earnings has been steady at 6 cents per share 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 3 cents per share, up by a penny 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 each of the trailing four quarters, the average surprise being 210.65%.

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

Time to Buy the TOST Stock?

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 3.48X compared with the industry’s 2.95X.

Price/Sales Ratio (F12M)

Image Source: Zacks Investment Research

However, as the company benefits from a strong portfolio, a growing clientele and an expanding market footprint, its strong growth prospects justify its premium valuation.

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

Marriott International, Inc. (MAR) : Free Stock Analysis Report

Potbelly Corporation (PBPB) : Free Stock Analysis Report

Uber Technologies, Inc. (UBER) : Free Stock Analysis Report

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

To read this article on Zacks.com click here.

Zacks Investment Research