While it may not be enough for some shareholders, we think it is good to see the Toast, Inc. (NYSE:TOST) share price up 19% in a single quarter. But that doesn't change the fact that the returns over the last year have been disappointing. Like a receding glacier in a warming world, the share price has melted 66% in that period. It's not that amazing to see a bounce after a drop like that. It may be that the fall was an overreaction.
After losing 5.1% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
Toast isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Toast grew its revenue by 86% over the last year. That's well above most other pre-profit companies. Meanwhile, the share price slid 66%. Typically a growth stock like this will be volatile, with some shareholders concerned about the red ink on the bottom line (that is, the losses). We'd definitely consider it a positive if the company is trending towards profitability. If you can see that happening, then perhaps consider adding this stock to your watchlist.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling Toast stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
We doubt Toast shareholders are happy with the loss of 66% over twelve months. That falls short of the market, which lost 18%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. Putting aside the last twelve months, it's good to see the share price has rebounded by 19%, in the last ninety days. Let's just hope this isn't the widely-feared 'dead cat bounce' (which would indicate further declines to come). I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Toast has 3 warning signs we think you should be aware of.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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