Toast, Inc. (TOST): A Bull Case Theory

We came across a bullish thesis on Toast, Inc. on The Cash Flow Compounder’s Substack. In this article, we will summarize the bulls’ thesis on TOST. Toast, Inc.'s share was trading at $36.20 as of January 12th. TOST’s trailing and forward P/E were 82.27 and 28.74 respectively according to Yahoo Finance.

Toast, Inc. operates a cloud-based digital technology platform for the restaurant industry in the United States, Ireland, India, and internationally. TOST is emerging as a high-conviction compounder within the restaurant technology space, transforming fragmented systems into a unified digital operating platform that manages everything from payment processing and kitchen operations to payroll and customer engagement. Its “land-and-expand” model has proven highly effective, with restaurants starting on point-of-sale (PoS) solutions and gradually adopting higher-margin software modules.

This integration not only drives recurring revenue but also creates strong switching costs and an emerging network effect, as Toast’s expanding user base attracts third-party developers to its ecosystem. The company commands roughly 13% U.S. market share, serving over 114,000 restaurants, and is leveraging its scale to expand internationally and into adjacent food and beverage retail verticals.

Financially, Toast is an asset-light business with recurring revenues, growing free cash flow, and a clear path to margin expansion. The company achieved profitability in 2023, posting $0.55 EPS in 2024 and guiding toward a 30–35% adjusted EBITDA margin by 2027. Management ownership of 12%, with over 70% voting control retained by founders, reinforces alignment with shareholders. With net margins improving from –32% in 2019 to 2% in 2024 and ROCE trending toward 15%, Toast’s fundamentals are strengthening rapidly.

While exposure to economic cycles and regulatory risks in FinTech remain concerns, its robust balance sheet—with $1.2B in cash against $949M liabilities—provides a solid buffer. Scoring 18.5/22 under The Compounder framework, Toast stands as a “High Conviction” opportunity—profitable, defensible, and positioned for durable double-digit growth across global restaurant technology markets.

Previously we covered a bullish thesis on Toast, Inc. (TOST) by Nikhs in March 2025, which highlighted its post-pandemic turnaround, profitability, and vertically integrated platform. The stock has been flat since our coverage. The Cash Flow Compounder shares a similar view but emphasizes Toast’s compounder profile and recurring revenue strength.

Toast, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 67 hedge fund portfolios held TOST at the end of the second quarter which was 64 in the previous quarter. While we acknowledge the potential of TOST as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.