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TOST (Toast Inc) IPO stock analysis

$TOST (Toast Inc.) operates a cloud-based technology platform for the restaurant industry in the US and Ireland. It offers Point of Sale, a hardware product,

Toast Order & Pay, which allows guests to order and pay from their mobile devices, as well as other hardware.


This enhances the overall efficiency of table turn times/customer experience and the generic management software of running a restaurant.


In addition to this, it offers Toast Online Ordering & Toast TakeOut app, a software that connects online channels, points of sale, menu management and kitchen operations in real time.


It also has software infrastructure that allows any restaurant to join a network of delivery services e.g. GrubHub, UberEats, Deliveroo, PostMates Etc. Therefore making every restaurant that uses Toast competitive and able to send takeout food.


๐—ฆ๐—ต๐—ผ๐—ฟ๐˜ ๐—™๐—ถ๐—ด๐˜‚๐—ฟ๐—ฒ๐˜€


Financials:

$1.8bn in revenue

$929.06m in cost of revenue

$254m in gross profit

$613.1m in Expenses

$-359.1m in Earnings


Now this might seem like quite a negative outlook for the company but there are a few reasons for this.


Firstly, the company is recovering from the COVID-19 pandemic and as this company operates in the restaurant industry, it was affected quite severely, however the rebound has been rapid and we should see sustained profitability within 3 years.


By 2023, 9 analysts estimate that the company will have revenue of approx. $2.9bn.


However, earnings are forecast to be approx. $484m.


Now, this looks like there could be a profitability margin/efficiency issue.

This isnโ€™t great for a company as it shows inefficiency, however, as this company focuses on cloud computing and software are constantly being streamlined, we might see the earnings looking better than forecasted.


TOSTโ€™s Revenue (28.3% per year) is forecast to grow faster than the US market (9.8%)


Short term assets of $534.8m and short term liabilities of $252.6m.

Long term assets of $161.3m and long term liabilities of $209.8m.

Short term assets cover all liabilities, TOST has a flawless balance sheet and no debt.


Even though TOST is not profitable, it does have sufficient cash runway for more than 3 years due to free cash flow being positive and growing by 81% per year.


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Chris Comparato is the CEO with 6 years tenure and compensation of $374,668. This is good as it shows management isnโ€™t being overpaid. The usual compensation for a company of similar size is around $11m.


The board has a wealth of experience including some investors who have previously built some billion dollar companies. E.g. Steven Papa


Within the last 3 months, insiders have bought around $75.3m worth of shares whereas in the same time period, insiders have only sold $24.4m worth of shares. This means that insiders have bought a net value of $50.9m worth of shares.


This is great to see as a potential investor as it shows that the insiders themselves have great confidence in the business despite the lack of profitability at the moment.


Notable shareholders include: Goldman Sachs, JP Morgan, Costcoโ€™s 401(K) retirement fund and the Vanguard group. Some pretty big players have significant holdings in this company.


Looking forward for the gains of this promising company.


Feel free to share your thoughts in the comment section.

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