Recent attention on Toast (TOST) has been driven by its push beyond core restaurant payments, as the company rolls out AI tools like Toast IQ, enters new sectors, and steps up international expansion.

Toast’s US$32.60 share price has recently picked up, with a 7 day share price return of 11.61% and a 30 day return of 15.77%. However, the 1 year total shareholder return is still down 32.94%, while the 3 year total shareholder return is up 59.88%, which suggests recent momentum has improved after a weaker period.

If Toast’s AI push has your attention, this can be a good moment to see what else is moving and uncover 65 profitable AI stocks that aren't just burning cash

After Toast’s sharp short term rebound, the choice is whether to lean into the current price strength or wait for a pullback. To weigh that up properly, it helps to look closely at where valuation now sits.

Most Popular Narrative: 23% Undervalued

Toast’s most followed narrative points to a fair value of $42.19, compared with the recent $32.60 share price, which sets up a clear valuation gap to examine.

Expansion into international markets, enterprise customers and food and beverage retail, all leveraging the same core platform, enables Toast to scale from 156,000 to potentially 500,000 locations, supporting a path from $2 billion to $5 billion and $10 billion in ARR with rising absolute earnings.

Want to understand why some analysts think Toast can support that kind of ARR and earnings profile? The narrative leans heavily on sustained revenue compounding, margin expansion and a future earnings multiple that assumes the restaurant platform keeps gaining meaningful scale.

Result: Fair Value of $42.19 (UNDERVALUED)

However, Toast’s narrative also leans on ongoing hardware subsidies and higher sales costs, as well as on expanding into new markets that may not reach profitable scale as expected.

Another View On Toast’s Valuation

The popular Toast narrative leans on a future P/E of 24.4x in 2029. Today though, the stock trades on a P/E of 45.9x, compared with a fair ratio of 22.8x, the peer average of 26.7x and the US Diversified Financial industry at 15.2x. That is a wide gap for investors to consider and raises the question of whether the premium is justified.

To see how those current multiples stack up against the underlying numbers and what would need to change for Toast to move closer to its fair ratio, See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

Sentiment around Toast is mixed in this article, so it can help to see the underlying drivers for yourself and move quickly. To understand what is currently exciting some investors, take a closer look at the 3 key rewards

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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.