Buy Toast

It took about a month, but Watch List stock Toast (TOST) has slipped down to a price where it looks like a solid buying opportunity, trading almost 27% below our $29.50 fair value price. That’s a nice margin of safety. I’m adding it to the Buy List at its Friday close of $21.62/share.

We did a full review for Toast about a month ago. The company provides an "out-of-the-box" point-of-sale, payment processing, and business management software-as-a-service platform tailored to the food establishment vertical.

The business has all of the characteristics we are looking for. Recurring revenues in the form of subscription and "toll-booth" sources (in this case, taking a small cut of every dollar processed through their platform). Growth potential in the form of adding new clients (growing at 30%+ annually), and expanding spend with existing clients (net revenue retention of 117%). Moat in the form of high switching costs. Founder-led management (3 of the founders remain in leadership positions). Strong financial health with a debt-free balance sheet and expanding cash flow margins.

Toast makes a nice new addition to our owned stocks! For investors looking to put money to work, now represents as good a time as I’ve seen in 6 months or more. In addition to Toast, 7 of our portfolio stocks are now in "Buy" territory. Check them out!