Do You Believe in the Upside Potential of PAR Technology Corporation (PAR)?

Baron Funds, an investment management company, released its “Baron Small Cap Fund” first-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the first quarter of 2025, the fund was down 9.07% (Institutional Shares) compared to the Russell 2000 Growth Index’s (the Index) -11.12% return. Small-cap stocks continued to underperform larger market caps meaningfully, so the Fund lagged the Russell 3000 Index, which fell 4.72% in the quarter. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its first-quarter 2025 investor letter, Baron Small Cap Fund highlighted stocks such as PAR Technology Corporation (NYSE:PAR). PAR Technology Corporation (NYSE:PAR) offers omnichannel cloud-based hardware and software solutions to the restaurant and retail industries. The one-month return of PAR Technology Corporation (NYSE:PAR) was 10.27%, and its shares gained 36.43% of their value over the last 52 weeks. On May 23, 2025, PAR Technology Corporation (NYSE:PAR) stock closed at $65.95 per share with a market capitalization of $2.671 billion.

Baron Small Cap Fund stated the following regarding PAR Technology Corporation (NYSE:PAR) in its Q1 2025 investor letter:

"We purchased shares of PAR Technology Corporation (NYSE:PAR), a leading software, hardware, and service provider to the foodservice industry. PAR is building an all-in-one software and service platform for enterprise restaurants and convenience stores to run the most critical portions of their technology stacks. Historically, the company was known as a hardware supplier to large QSR restaurant chains, but since CEO Savneet Singh took the role in late 2018, he has made software the primary focus of the business through organic investment and M&A. The company has added several complementary software pieces around its core point-of-sale software product (less than $10 million in software revenue when Savneet took over) to build a unified technology platform offering integrated solutions and data insights supporting $275 million in ARR today growing 20% or more annually.

We purchased shares of PAR Technology Corporation, a leading software, hardware, and service provider to the foodservice industry. PAR is building an all-in-one software and service platform for enterprise restaurants and convenience stores to run the most critical portions of their technology stacks. Historically, the company was known as a hardware supplier to large QSR restaurant chains, but since CEO Savneet Singh took the role in late 2018, he has made software the primary focus of the business through organic investment and M&A. The company has added several complementary software pieces around its core point-of-sale software product (less than $10 million in software revenue when Savneet took over) to build a unified technology platform offering integrated solutions and data insights supporting $275 million in ARR today growing 20% or more annually.

We believe PAR will continue to grow its software revenues 20%-plus per year over the next several years, driven by wins with new restaurant brands and cross-sell of its product portfolio to existing customers. PAR just reported two consecutive quarters of adjusted EBITDA profitability driven by very strong operating leverage, and we expect the company to continue to deliver strong incremental margins as it grows revenue in excess of the required investment in its R&D or sales and marketing needed to scale its business. As profitability and cash flow ramp rapidly in the coming years (estimating over 25% EBITDA margins), combined with further accretive bolt-on and/or meaningful acquisitions, we see significant upside in the stock over time."

PAR Technology Corporation (NYSE:PAR) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 28 hedge fund portfolios held PAR Technology Corporation (NYSE:PAR) at the end of the first quarter compared to 33 in the third quarter. PAR Technology Corporation’s (NYSE:PAR) first quarter revenue increased more than 48% to $104 million. While we acknowledge the potential of PAR Technology Corporation (NYSE:PAR) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.

In another article, we covered PAR Technology Corporation (NYSE:PAR) and shared Greenhaven Road Capital's views on the company. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors.

READ NEXT: Michael Burry Is Selling These Stocks and A New Dawn Is Coming to US Stocks.

Disclosure: None. This article is originally published at Insider Monkey.