1 Top Growth Stock Worth Buying Now Down to 63% Only

Is the stock down 63% really worth buying today? Does this mean the investment community got something wrong?

Toast (NYSE: TOST)The company's industry is growing strongly, but its stock price is in the toilet. Let's take a look at why it's falling, what investors might be missing, and what its plummeting stock price might be an opportunity for.

What does Toast do?

Toast is a technology company that provides software-as-a-service (SaaS) solutions for the restaurant industry. Toast's solution combines all of the studio's management with digital tools, analytics, and payment services to improve efficiency, save money, and speed up operations.

Since its IPO in 2021, Toast has been growing at a high rate and is getting closer to GAAP profitability. in the fourth quarter of 2023, both aggregate revenue and annualized recurring revenue (ARR) grew 35% year-over-year to $1.2 billion. Gross profit increased 431 TP3T year-over-year, outpacing revenue growth and thereby improving profitability. Fourth quarter net loss decreased from $99 million in 2022 to $36 million in 2023 and adjusted EBITDA increased from an $18 million loss in 2022 to $29 million in 2023.

Losses may still be a concern, but they are not unusual for a growing company. Koon explained that the company has experienced high growth over the past three years and is now taking steps to reduce expenses, including layoffs 10%. As the company expands, it invests in its growth. Throughout this process, it may need to rebalance to improve efficiency, and Toast is there, an opportunity for the company to prove that it can utilize its resources to grow at a high rate.

Small Market, Big Opportunity

By the end of 2023, Toast will have grown 34% year-over-year to 106,000 locations. If that sounds like a lot, then it sees an opportunity for 22 million locations worldwide. It currently serves an addressable market of $15 billion, with a total revenue share of less than 10% in 2023 and a total opportunity of $110 billion. The company benefits from a strong network presence, with approximately 75% of new outlets coming from internal channels. About 20% of the new outlets come from customer referrals.

In addition to new sites and customers, Toast is growing revenues through upsells, product innovation and pricing actions. The company has multiple product tiers, offers hardware and software features, and has several growth opportunities in its existing customer base.

Why did Toast shares fall?

Despite its impressive growth over the past few years, Toast's stock is still down about 63% from its all-time high, but it has been on the rise, up 40% in the last year.

Toast went public before the last bear market, at the end of a record IPO year. Its high valuation at the time of its IPO wasn't necessarily justified, so it's not surprising that its shares have fallen as the stock market has generally declined, and Toast's stock now trades at a price-to-sales ratio of 3, which seems entirely justified for a high-growth stock.

Toast stock could skyrocket.

Toast's stock price should continue to climb as it continues to win customers, grow sales at a rapid pace, and make smart decisions about how to expand its name. Investors were right; they were overly excited about IPO stock when Toast went public, which set the stage for the stock's decline.

At its current valuation, Toast is good value for money. Over the next few years, Toast could become a very good stock, and possibly a long term hold, and investors should consider buying Toast stock.

Should you invest $1,000 in Toast now?

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Jennifer Saibil does not own any of the shares listed above. the Motley Fool owns Recommend Toast. the Motley Fool has a disclosure policy.

1 Top Growth Stocks Worth Buying Now That Only Drop 63% was originally published by The Motley Fool.