Toast Inc. (NYSE:TOST) Identified as a Top Growth Stock by Navellier Screen

Growth investing strategies often focus on identifying companies demonstrating strong and accelerating business momentum. One systematic approach, outlined in Louis Navellier’s “The Little Book That Makes You Rich,” uses eight specific rules to find superior growth stocks. These rules stress positive earnings revisions and surprises, increasing sales, widening margins, strong cash flow, earnings growth, positive earnings momentum, and a high return on equity. A recent screen based on this method has identified Toast Inc-Class A (NYSE:TOST) as a company deserving attention from growth-focused investors.

Strong Earnings Momentum and Revisions

A key part of the Navellier method is monitoring analyst sentiment and a company’s capacity to beat forecasts. Toast shows strength in these areas, which are important signs of future price momentum.

• Positive Earnings Revisions: Analyst EPS estimates for the next quarter have been adjusted upward by 7.93% over the last three months. This points to increasing confidence in the company’s short-term outlook.
• Positive Earnings Surprises: Toast has exceeded analyst EPS estimates in three of its last four quarterly reports, with an average surprise of 57.73%. Regularly beating forecasts can lead analysts to improve their future estimates, which may push the stock price up.

Strong Revenue and Profitability Expansion

For a growth stock, revenue expansion should be paired with gains in efficiency. Toast’s recent results display encouraging trends on both counts.

• Increasing Sales Growth: The company reported a 26.11% rise in revenue over the past year, with quarter-over-quarter growth at 24.80%. This quickening sales pace is a main feature looked for by growth investors.
• Widening Operating Margin: An important indicator of better profitability, Toast’s operating margin has widened by 229.1% over the past year. This shows the company is increasing sales without a matching rise in costs, a very good sign.

Notable Cash Flow and Earnings Growth

Lasting growth is supported by strong cash generation and bottom-line performance. Toast displays very high growth in these basic measures.

• Strong Cash Flow: The company’s free cash flow increased by 476.3% over the past year. Healthy cash flow offers financial room to fund operations and put money into future growth without needing much outside financing.
• Earnings Growth: Toast’s earnings per share (EPS) increased by 223.08% over the past year. More significantly, its most recent quarter saw a 550% rise in EPS compared to the same quarter a year before, pointing to strong earnings momentum.

High Return on Equity

The last rule in the strategy centers on efficiency. Toast’s return on equity (ROE) is 12.32%. This measure indicates that the company is producing a good profit from the equity invested by shareholders, a sign of a well-run business.

Fundamental Analysis Overview

An examination of Toast’s wider fundamental profile shows a company in good health but with a high valuation. According to a detailed fundamental analysis, Toast is strong in financial health, showing no liquidity or solvency issues, and displays very good growth metrics. However, its present valuation is high based on traditional price-to-earnings ratios. This is typical of high-growth companies where investors are paying for future earnings potential. The analysis indicates that while the stock is valued for high performance, its basic business momentum is significant.

A Starting Point for Further Research

The use of Louis Navellier’s screening criteria has effectively identified Toast as a company displaying the strong, multi-faceted growth profile that growth investors look for. The consistency across earnings revisions, sales acceleration, margin widening, and cash flow generation makes it an interesting candidate for more research.

This screen is a changing tool, and investors are advised to research other companies that presently meet these strict growth standards. You can see all the current results and change the filters yourself by visiting the Little Book That Makes You Rich screen on ChartMill.

Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer to buy or sell any securities. Investors should conduct their own research and consider their individual financial circumstances before making any investment decisions.