Toast Inc. (NYSE:TOST) Fits a Proven Growth Stock Framework

Growth investors looking for systematic ways to pick stocks frequently use proven methods to find companies with solid expansion prospects. One framework is from Louis Navellier's "The Little Book That Makes You Rich," which lists eight basic rules for finding leading growth stocks. These standards center on earnings momentum, sales increases, profitability gains, and financial condition to select for companies showing speeding up business results. A recent filter using these measures has found Toast Inc-Class A (NYSE:TOST) as fitting the approach's strict needs.

Earnings Revisions and Surprises

Navellier's approach stresses the value of positive earnings revisions, since upward changes by analysts often point to developing positive business patterns. Toast shows this trait with its next-quarter EPS estimate being increased by 7.93% in the last three months. This points to rising analyst belief in the company's short-term future.

The method also focuses on steady earnings surprises, which make analysts repeatedly rethink their forecasts. Toast has performed on this aspect with:

• Three positive EPS surprises in its past four quarterly reports
• An average surprise of 57.73%, greatly surpassing estimates

Sales and Earnings Momentum

Speeding up revenue growth is a central part of Navellier's method, showing widening market reach and demand. Toast displays solid sales increases over several periods:

• 26.11% year-over-year revenue growth
• 24.80% quarter-over-quarter revenue growth

The earnings growth path is even more notable, with Toast displaying powerful momentum:

• 223.08% year-over-year EPS growth
• 550% quarter-over-quarter EPS growth
• Current quarterly EPS growth of 550% greatly exceeding the 110.53% growth from the same quarter last year, pointing to strong speeding up

Profitability and Financial Condition

Widening operating margins point to better operational effectiveness as sales increase, another important Navellier standard. Toast has shown outstanding margin gain with operating margin growth of 229.10% over the past year, suggesting the company is growing profitably.

Good cash flow creation offers financial room and backs lasting growth. Toast performs well here with free cash flow growth of 476.30% over the past year, giving the company significant means to put back into expansion or improve its financial position.

Return on equity gauges how well management creates profits from shareholder investments. Toast reaches a 12.32% ROE, easily above Navellier's lowest limit of 10% and pointing to effective capital use.

Fundamental Assessment

According to ChartMill's complete study available in the full fundamental report, Toast gets an overall score of 5 out of 10. The company shows very good financial condition with no remaining debt and good liquidity measures, while displaying outstanding growth numbers that match well with growth investing plans. Valuation stays high with elevated P/E ratios, though this is partly explained by the company's solid growth path and bettering profitability.

Investment Points

While Toast fits many of the Little Book standards notably, investors should be aware the company's valuation measures remain high next to industry counterparts. The fundamental study indicates Toast trades at large premiums on both standard and forward P/E bases. Still, the outstanding growth rates and widening margins may support these valuations for growth-focused investors ready to pay for speeding up business results.

The company's place in the restaurant technology field gives contact to the continuing digital change of the food service industry. As restaurants more and more take on complete technology systems, Toast's combined payment handling, hardware, and software answers place it to gain from this lasting direction.

For investors curious about finding other companies that fit the Little Book standards, the pre-configured screen gives more choices that show similar growth features. This filtering method can act as a beginning point for more fundamental study into companies displaying speeding up business results.

Disclaimer: This article is for informational purposes only and does not constitute investment advice, financial analysis, or recommendation to buy or sell any security. Investors should conduct their own research and consult with financial advisors before making investment decisions.