Is Toast Stock a Buy Under $20?

: TOST | Toast, Inc. News, Ratings, and Charts

TOST – Currently trading under $20, shares of Toast Inc. (TOST) dipped nearly 46% so far this year over its weak guidance for the first quarter. While the restaurant industry makes its way out of the pandemic blues, can the stock rebound in the near term? Let’s find out.

Toast Inc. (TOST) is an all-in-one cloud-based digital technology platform designed for restaurants of all sizes. It provides a unified platform of software as a service products and financial technology solutions that provide restaurants with everything they need to run their business, including point of sale, digital ordering and delivery, marketing, and staff management.

The stock is down 46.4% year-to-date and 13.9% over the past month, closing Friday’s trading session at $18.63. Despite reporting a net income of $2 million in the last quarter, the firm fell short of market expectations. The company emphasized many industry-wide issues that restaurant owners faced, such as shifting worker demographics, a prolonged labor shortage, and rising input prices owing to supply chain disruptions.

Here’s what could shape TOST’s performance in the near term:

Inadequate Financial Performance

TOST’s revenue rose 110.7% year-over-year to $512 million for the fourth quarter, which ended Dec. 31, 2021. Its operating expenses grew 81.7% from its year-ago value to $189 million. Its operating loss surged 103.5% from the previous-year quarter to $116 million. And the company’s loss per share came in at $0.23. In addition, its net cash used in operating activities amounted to $32 million, representing a 14.3% increase over this period.

Stretched Valuation

In terms of forward Price/Book, the stock is currently trading at 12.24x, 194% higher than the industry average of 4.16x. Also, its trailing-12-months EV/Sales of 3.51x is 18.3% higher than the industry average of 2.97x. Moreover, TOST’s trailing-12-months Price/Sales of 4x is 31.5% higher than the industry average of 3.04x.

Poor Profitability

TOST’s trailing-12-months gross profit margin of 18.7% is 63.1% lower than the industry average of 50.6%. Its trailing-12-months cash from operations of $2 million was 97.8% lower than the industry average of $90.61 million. Also, its trailing-12-months ROA, net income, and ROC are negative 28.1%, 28.6%, and 15.9%, respectively.

POWR Ratings Reflect Bleak Outlook

TOST has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. The POWR ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. TOST has a D grade for Value. The company’s higher than industry valuation is consistent with the Value grade.

Of the 60 stocks in the D-rated Software – Business industry, TOST is ranked #50.

Beyond what I’ve stated above, you can view TOST ratings for Growth, Momentum, Stability, Quality, and Sentiment here.

Bottom Line

TOST failed to meet the market’s expectations in its most recent earnings report, and its dismal prognosis for the next quarters increased investors’ concerns. In addition, the stock is currently trading below its 50-day and 200-day moving averages of $19.63 and $25.71, respectively, indicating a downtrend. So, considering its low profitability, we believe the stock is best avoided now.

How Does Toast Inc. (TOST) Stack Up Against its Peers?

While TOST has an overall D rating, one might want to consider its industry peers, VMware Inc. (VMW), Amdocs Ltd. (DOX), and Sapiens International Corporation N.V. (SPNS), which have an overall A (Strong Buy) rating.

Want More Great Investing Ideas?

3 Stocks to DOUBLE This Year


TOST shares fell $0.28 (-1.50%) in premarket trading Monday. Year-to-date, TOST has declined -47.13%, versus a -13.29% rise in the benchmark S&P 500 index during the same period.


About the Author: Pragya Pandey


Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
TOSTGet RatingGet RatingGet Rating
VMWGet RatingGet RatingGet Rating
DOXGet RatingGet RatingGet Rating
SPNSGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


Investors: Are You Ready for November?

The S&P 500 (SPY) tumbled to end October. Is that a harbinger of more downside to come? Or will the bull market return with gusto? Investment pro Steve Reitmeister shares his time market views including a preview of his favorite stocks. Get the full story below...

3 Cybersecurity Stocks Defending Against Digital Threats

The demand for cybersecurity solutions is rising as digital threats and sophisticated cyberattacks continue to escalate. Therefore, it might be wise to keep track of cybersecurity stocks, CrowdStrike (CRWD), Palo Alto Networks (PANW), and Fortinet (FTNT), as they offer innovative solutions presenting further growth opportunities. Continue reading...

3 Oil Stocks With High Upside as Global Demand Rebounds

The outlook for oil demand growth appears promising despite economic uncertainties and worldwide supply deficit. Amid this, investing in quality oil stocks Enterprise Products Partners (EPD), Marathon Oil (MRO), and Plains All American Pipeline (PAA) could be ideal as global demand rebounds. Read more...

3 Tech Stocks Under $10 That Could Deliver Big Gains

The technology industry is booming, driven by breakthroughs and significant government investments. Thus, incorporating affordable tech stocks, Sprinklr (CXM), Sabre Corporation (SABR), and Cricut (CRCT) into your portfolio provides an accessible entry point to capitalize on the industry’s growth. Read more…

2 Concerns for Investors in October

The S&P 500 (SPY) may be touching all time highs...but recent action points to concerns on 2 fronts: inflation and earnings. Investment veteran Steve Reitmeister shares his views on these 2 timely topics along with a preview of his top stocks to buy now.

Read More Stories

More Toast, Inc. (TOST) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All TOST News