Toast (TOST) is back in focus after its stock declined around 3.4% during a broader selloff that hit high valuation tech and software companies as investors reacted to rising interest rates and geopolitical tensions.

Over the past month Toast has shown improving momentum with a 30 day share price return of 15.4% and a 90 day share price return of 13.58%. However, the share price is still down 15.2% year to date and the 1 year total shareholder return has declined 34.82%. This points to a stock that remains in recovery mode after a tougher stretch for holders.

If Toast's recent swings have you thinking about where else growth and volatility might show up next, it could be worth scanning 52 AI infrastructure stocks.

Toast clearly has a sizable restaurant platform and recent share price swings to match. The real issue now is whether that business strength is already fully baked into today’s valuation or still on offer at a discount.

Most Popular Narrative: 14.8% Undervalued

Against Toast's last close at $28.85, the most followed narrative pins fair value at $33.88, putting a modest discount under the spotlight.

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.

Read the complete narrative. Read the complete narrative.

Want to understand why this narrative sees more runway for Toast? The story leans heavily on compounded revenue growth, richer margins, and a punchy future earnings multiple. Curious which specific assumptions have the biggest impact on that $33.88 figure?

Result: Fair Value of $33.88 (UNDERVALUED)

However, Toast still faces pressure from rising sales and marketing spend and intense competition, which could squeeze margins and challenge the narrative that the stock is currently undervalued.

Another View: Toast Through the Earnings Lens

The narrative and SWS DCF model see Toast as undervalued, yet the P/E ratio tells a very different story. At 40.6x earnings versus 16x for the US Diversified Financial industry, 29x for peers, and a fair ratio of 22.5x, the stock looks richly priced on earnings. Which signal do you trust more right now?

Investors comparing these earnings based signals with the story implied by fair value models may want to look more closely at how much optimism is already in the price, and how sensitive that is to execution and sentiment shifts. See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

If the mixed signals around Toast leave you unsure, this is the moment to move fast, review the data first hand, and weigh the positive factors yourself. To see what investors are optimistic about right now, 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.