In this episode, Michael takes a close look at Toast, one of the fastest growing names in restaurant technology. Toast has delivered a 50% 5-YR revenue CAGR, 80% 5-YR gross profit CAGR, 110%+ net retention and its first year of positive SBC adjusted free cash flow. Despite that momentum, the company is still early in its profitability journey. SaaS quality is improving, but the payments heavy revenue mix continues to distort gross margins and complicate valuation work.

The path from high growth to a durable compounder remains open. If Toast executes consistently, today’s valuation may offer intriguing opportunity, but if it stumbles, the outcome range widens quickly. Michael breaks down why the fair value estimate spans $28 to $43 and highlights the KPIs that matter most, including SaaS gross profit contribution and ARR per location. For quality focused investors, Toast is not yet a core compounder, but it may be a compelling optionality position at the current price of $35.

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00:00 Intro

00:37 Investment Checklist & Database

01:25 Business Overview

12:18 Industry Overview

18:41 Quality Growth Profile

19:36 Financial Statement Overview

24:38 Leadership & Incentives

27:37 KPIs to Track

28:55 Valuation & Technical Analysis

33:05 Verdict

35:20 Outro

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Intro Music: Andrey Rossi – Seize the Day

Outro Music: Ra – Prospect

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Disclosure: The host of Stock Spotlight is not a licensed financial advisor. The information and opinions shared during the show are for entertainment purposes only.