- If you are wondering whether Toast's current share price is fair, expensive, or offers value, this article walks through the numbers so you can judge that for yourself.
- Toast shares last closed at US$26.47, with recent returns of 0.3% over 7 days, a 9.1% decline over 30 days, a 22.2% decline year to date, and a 19.0% decline over 1 year, while the 3 year return stands at 59.9%.
- Recent coverage has focused on Toast's position in the restaurant technology space and its ability to scale its platform across different types of food service businesses. News around product rollouts and customer adoption helps explain why the market has been reassessing both the risks and potential rewards reflected in the share price.
- On Simply Wall St's valuation checks, Toast currently scores 2 out of 6. The next sections will break down how different valuation methods look at that score and then finish with a broader way to think about what fair value really means for this stock.
Toast scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
Approach 1: Toast Excess Returns Analysis
The Excess Returns model looks at how much value Toast can create over and above the return that shareholders require. Instead of focusing on cash flows, it starts with what shareholders have invested in the business and compares the expected return on that equity to the company’s cost of equity.
For Toast, the model uses a Book Value of US$3.61 per share and a Stable EPS of US$1.50 per share, based on weighted future Return on Equity estimates from 8 analysts. The Average Return on Equity is 22.29%, while the Cost of Equity is US$0.48 per share. That gap feeds into an estimated Excess Return of US$1.02 per share, which is what the model treats as value created beyond the required return.
The model also assumes a Stable Book Value of US$6.72 per share, sourced from weighted future Book Value estimates from 5 analysts. Putting these inputs together, the Excess Returns approach arrives at an intrinsic value of about US$33.76 per share, which implies the stock is 21.6% undervalued relative to the recent price of US$26.47.
Result: UNDERVALUED
Our Excess Returns analysis suggests Toast is undervalued by 21.6%. Track this in your watchlist or portfolio, or discover 62 more high quality undervalued stocks.
Approach 2: Toast Price vs Earnings
P/E is often a useful way to look at profitable companies because it links what you pay directly to the earnings the business is generating today. The higher the growth investors expect and the lower they see the risk, the more they are usually willing to pay in the form of a higher P/E ratio.
Toast currently trades on a P/E of 45.6x. That is higher than both the Diversified Financial industry average of 15.4x and the peer group average of 29.0x. Simply comparing those numbers might suggest the shares are priced more expensively than many sector peers, but that does not tell you whether the premium lines up with Toast’s own earnings profile and risk factors.
To address that, Simply Wall St calculates a Fair Ratio of 19.5x for Toast. This is a proprietary estimate of what a reasonable P/E could be given factors such as earnings growth, profit margins, industry, market cap and company specific risks. Because it is tailored to Toast’s fundamentals rather than broad peer groups, it can provide a more focused reference point. Comparing the current 45.6x P/E to the 19.5x Fair Ratio suggests Toast is trading above this fair range.
Result: OVERVALUED
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Upgrade Your Decision Making: Choose your Toast Narrative
Earlier it was mentioned that there is an even better way to understand valuation, so this is where Narratives come in as a simple way for you to connect a company’s story with a set of financial assumptions and a Fair Value that you can compare to the live share price.
A Narrative on Simply Wall St is your version of the Toast story, where you set out what you think happens to revenue, earnings and margins, and the platform turns that story into a forecast and a Fair Value estimate on the Community page.
Narratives are designed to be approachable. Instead of wrestling with spreadsheets, you choose assumptions and the platform handles the math, then shows you whether your Fair Value is above or below the current price to help you judge if Toast looks expensive or offers value on your terms.
Because Narratives update as new information such as news or earnings is added to the platform, you always see your Toast story refreshed in real time, which makes it easier to decide if anything has changed enough in your view to act.
For example, one Toast Narrative on the platform currently anchors to a Fair Value of about US$60.85 while another anchors to about US$36.00. This shows how two investors can look at the same company, plug in different assumptions and reach very different conclusions about what the shares are worth.
Do you think there's more to the story for Toast? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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