As the premium player who's gaining market share Toast commands a premium that Aadien can't quite command due to them falling behind their main competitor this year. I think up until last year, it was still a race of two horses, but the comparative race has gone more clearly in Stripe's favor.
Re FOUR and GPN I think If you're looking for inflection point investing, these are definitely the ones to go with. Whereas if you're looking to buy a long-term growth company, Toast or Avian are the ones to own, that's how I'm thinking about it at least.
On an EPS basis, TOST is pretty cheap right now at 17x growing north of 20%. Not even accounting for its net cash position. Is there a reason why FCF and EBITDA are used instead here? Excellent article and work as always Bob.
The 17x multiple you cite is based on an adjusted EPS number, which adds back stock-based compensation. Toast still has significant SBC. Over the NTM, I have Toast doing about $0.85 in GAAP EPS, which implies a multiple closer to 30x. I think that's reasonable for their growth profile. A lot of the companies across payments and fintech have different ways of calculating earnings. I try to apply a uniform standard, which is EBITDA on a GAAP basis. Under that standard, Toast is still more expensive than peers like Adyen and Block but cheaper than Shopify. Hope that helps!
Insightful analysis, enjoy reading, as I recently dived into the space.
Multiple (sbc considered) is prohibitively high imo (low 20x ev/ebitda), almost 3x premium to Fiserv, which its Clover 5-6x larger, and Toast-Clover growth rate gap is narrowing rapidly.
Great analysis. Thanks for including some sensitivities on the DCF. It looks to me that the premium here is well justified.
As the premium player who's gaining market share Toast commands a premium that Aadien can't quite command due to them falling behind their main competitor this year. I think up until last year, it was still a race of two horses, but the comparative race has gone more clearly in Stripe's favor.
Re FOUR and GPN I think If you're looking for inflection point investing, these are definitely the ones to go with. Whereas if you're looking to buy a long-term growth company, Toast or Avian are the ones to own, that's how I'm thinking about it at least.
On an EPS basis, TOST is pretty cheap right now at 17x growing north of 20%. Not even accounting for its net cash position. Is there a reason why FCF and EBITDA are used instead here? Excellent article and work as always Bob.
The 17x multiple you cite is based on an adjusted EPS number, which adds back stock-based compensation. Toast still has significant SBC. Over the NTM, I have Toast doing about $0.85 in GAAP EPS, which implies a multiple closer to 30x. I think that's reasonable for their growth profile. A lot of the companies across payments and fintech have different ways of calculating earnings. I try to apply a uniform standard, which is EBITDA on a GAAP basis. Under that standard, Toast is still more expensive than peers like Adyen and Block but cheaper than Shopify. Hope that helps!
Insightful analysis, enjoy reading, as I recently dived into the space.
Multiple (sbc considered) is prohibitively high imo (low 20x ev/ebitda), almost 3x premium to Fiserv, which its Clover 5-6x larger, and Toast-Clover growth rate gap is narrowing rapidly.
Fiserv is worth a look, imo.