Toast (TOST) is back in focus after recent analyst estimate revisions highlighted expectations for a meaningful EPS improvement. This has prompted investors to reassess how its restaurant platform and enterprise wins might influence the stock.

Despite the optimism around earnings and new enterprise wins, Toast’s share price return has been weak recently. The 30 day share price return is 5.44% and the 90 day share price return is 26.58%, while the 3 year total shareholder return of 59.25% reflects a much stronger earlier run. This suggests momentum has faded in the short term as investors reassess risk and expectations around its growth story.

If Toast’s recent swings have you thinking about where else growth and risk might be priced differently, it could be worth scanning 36 AI infrastructure stocks

With Toast now trading around a 23% implied discount to one intrinsic value estimate and about 41% below the average analyst price target, the key question is whether this reset creates a genuine opportunity or if the market already reflects its future growth.

Most Popular Narrative: 31% Undervalued

With Toast closing at $26.07 against a narrative fair value of about $37.70, the current price sits well below what this model implies, putting the focus firmly on its long term earnings potential and restaurant platform reach.

The rapid adoption of integrated digital payment and ordering solutions, including mobile and contactless experiences, continues to expand Toast's addressable market, positioning the company to capture increased transaction volume and higher recurring fintech and software revenues as restaurants upgrade from legacy systems.

Long-term challenges with labor shortages and wage pressures in hospitality drive restaurants to seek automation and operational efficiency, increasing demand for Toast's AI-driven tools (such as ToastIQ and Sous Chef) and productivity-enhancing hardware (Toast Go 3), which should support sustained revenue growth and improve net margins.

Curious what kind of revenue run rate and margin profile need to line up to back that $37.70 fair value? The narrative leans on double digit growth, rising profitability, and a future earnings multiple that assumes Toast earns a premium spot among US fintech and software peers.

The most followed narrative uses a 7.17% discount rate and assumes Toast can compound revenue at mid teens rates while lifting profit margins, which then supports a future P/E multiple above the wider US Diversified Financials sector. Those inputs, combined with analyst earnings forecasts out to 2029, are what drive the gap between the current $26.07 share price and the $37.70 model output.

Result: Fair Value of $37.70 (UNDERVALUED)

However, that upside story still depends on restaurant spending holding up, and on hardware, tariff, and international expansion costs not eating into the current margin roadmap.

Another View: Earnings Multiple Sends a Different Signal

The narrative fair value of $37.70 and a 22.7% DCF style discount suggest upside, but Toast’s current P/E of 44.9x tells a more cautious story. That is well above peers at 28.6x and the industry at 15.4x, and more than double a 19.6x fair ratio the market could move toward. This points to meaningful valuation risk if expectations ease. Which signal you trust more depends on how confident you are in those long term growth and margin assumptions.

See what the numbers say about this price in our valuation breakdown, starting with the See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

Uncertain about whether the current mix of optimism and concern around Toast matches your own view? Act now by weighing both sides with 3 key rewards and 1 important warning sign

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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.