Toast Inc-Class A (NYSE:TOST) Fits Louis Navellier’s High-Growth Stock Criteria

Louis Navellier’s The Little Book That Makes You Rich presents an eight-rule method for finding high-growth stocks with solid earnings momentum, rising profitability, and increasing revenue. The approach focuses on stocks that regularly outperform expectations, show rising analyst upgrades, and display growing margins, traits that frequently lead to notable price gains. By filtering for these factors, investors can find companies set for long-term growth.

Toast Inc-Class A (NYSE:TOST) stands out as a potential match for Navellier’s growth-oriented strategy. Here, we review how the company fits key aspects of the method.

How Toast Matches Navellier’s Growth Standards

1. Upward Earnings Adjustments
   Analysts have increased next-quarter EPS projections by 12.75% in the last three months, showing rising optimism about Toast’s short-term earnings. This fits Navellier’s belief that upward adjustments often come before earnings surprises and stock gains.

2. Regular Earnings Beats
   Toast has exceeded EPS estimates in three of the last four quarters, with an average beat of 81.17%. This pattern indicates the company frequently outperforms cautious predictions, a key feature of Navellier’s approach.

3. Strong Revenue Growth
   Sales rose 26.11% year-over-year (TTM) and 24.80% quarter-over-quarter, highlighting steady demand for Toast’s restaurant SaaS and payment services. Rising sales are vital for growth investors, as they often link to gaining market share.

4. Growing Operating Margins
   Operating margin jumped 229.1% over the past year, showing better cost control as revenue increases. Navellier points to margin growth as a sign of operational efficiency, which supports long-term earnings.

5. Healthy Cash Flow
   Free cash flow climbed 476.3% year-over-year, demonstrating Toast’s ability to turn sales into cash. Strong cash flow aids reinvestment and lowers the need for outside funding, a focus in Navellier’s framework.

6. Faster Earnings Growth
   Quarterly EPS surged 1,100% year-over-year, well above the 110.53% growth seen in the previous comparable quarter. This speed aligns with Navellier’s focus on momentum in profit performance.

7. High Return on Equity (ROE)
   Toast’s 12.32% ROE beats 65.35% of industry rivals, showing effective use of investor funds. Navellier prefers firms with increasing ROE, as it often reflects competitive strengths and pricing ability.

Financial Health and Valuation

Toast’s fundamental analysis shows a balanced view:

• Strengths: Outstanding growth figures, no debt, and solid liquidity (Current Ratio: 2.59).
• Risks: High valuation (P/E: 100.6) and lower operating margins (3.56%) compared to peers.
  While profitability is still developing, the company’s 237.7% expected annual EPS growth might support its premium price for growth-focused investors.

Looking Ahead

For investors searching for other high-growth options, the Little Book screener provides a live list of stocks meeting Navellier’s standards. Regular screening can help spot new opportunities in shifting market trends.

Disclaimer: This review is for informational use only and is not investment advice. Investors should perform their own research or seek professional guidance before making decisions.