A peer comparison of Toast against its closest industry competitors across revenue growth, profit margins, valuation multiples, and return on invested capital (ROIC) reveals where the company earns a premium and where it falls short. For investors researching Toast vs industry peers, this side-by-side breakdown offers a framework for evaluating whether TOST deserves its current market pricing relative to its peer group.
Key takeaways
- Toast's peer group typically includes companies like Shift4 Payments, Lightspeed Commerce, Block (Square), and PAX Global Technology, each competing in adjacent segments of restaurant or merchant technology.
- Revenue growth alone doesn't tell the full story. Comparing margins and ROIC alongside growth gives a more honest picture of which company is building durable value.
- Valuation multiples for high-growth fintech and restaurant tech companies can vary widely, so understanding what you're paying for matters more than the number itself.
- Toast's vertical focus on restaurants is both its biggest strength and a potential limitation when compared to more diversified peers.
Who belongs in the Toast peer group?
Before comparing numbers, you need to define the right comparison set. Not every payments company or SaaS platform is a fair peer for Toast. The company operates in a specific niche: restaurant technology, combining point-of-sale hardware, software subscriptions, and payment processing. That narrows the field.
The most commonly cited peers in a TOST industry comparison include:
- Shift4 Payments (FOUR) — a payments infrastructure company with significant restaurant and hospitality exposure.
- Lightspeed Commerce (LSPD) — a cloud-based POS and commerce platform serving restaurants and retail businesses.
- Block, Inc. (SQ) — the parent of Square, which competes in small-to-mid-sized merchant payments and POS, including food and beverage.
- PAX Global Technology — a payment terminal manufacturer with global reach, though less direct overlap in software and services.
Some analysts also include Olo (OLO) or NCR Voyix for their restaurant-specific software, but the four names above tend to show up most often in institutional peer group screens. The key is picking companies that share at least two dimensions with Toast: industry vertical, business model, or customer size.
Peer group: A set of companies similar enough in business model, industry, or size to serve as a meaningful benchmark for comparison. Getting this wrong can lead to misleading conclusions about valuation or performance.
How does Toast compare on revenue growth?
Revenue growth is usually the first thing investors look at with high-growth companies, and it's where Toast has generally held its own. The company has expanded rapidly by adding restaurant locations to its platform and increasing revenue per location through additional software modules, payment processing volume, and financial services.
Here's the thing, though: raw revenue growth numbers can be misleading if you don't account for what's driving that growth. Toast generates a large share of its revenue from payment processing, which carries thin margins. So a headline growth rate north of 30% or 40% sounds impressive, but the quality of that revenue varies depending on the mix.
Among the TOST vs sector comparisons:
- Shift4 has posted strong growth partly through acquisitions, which inflates the top line but raises integration questions.
- Lightspeed went through a period of acquisition-fueled growth followed by a strategic shift toward organic expansion and profitability, which slowed its top-line trajectory.
- Block is a much larger company, so its growth rate in percentage terms is naturally lower, but its absolute dollar growth remains significant.
When you normalize for acquisition effects and revenue quality, Toast's organic growth rate has been competitive with or above most of its peer group. That said, the gap narrows when you focus only on software and subscription revenue, where Lightspeed and Shift4 have been investing heavily.
Profit margins: where the real separation happens
This is where a Toast vs industry peers analysis gets interesting and, honestly, a bit uncomfortable for TOST bulls. Toast has historically operated at thin or negative operating margins. The company's heavy reliance on payment processing revenue, which typically carries gross margins in the low-to-mid teens, drags down the blended margin profile compared to pure software businesses.
Compare that to the peer group:
- Shift4 tends to run higher gross margins because of its gateway and software revenue mix, though it also has a significant processing component.
- Lightspeed has a higher software revenue mix, which gives it structurally better gross margins, even if it has struggled with operating profitability.
- Block has a more diversified margin profile thanks to Cash App and its financial services ecosystem, which pulls blended margins higher than a pure merchant processing comparison would suggest.
Gross margin vs. operating margin: Gross margin measures how much revenue remains after direct costs (like payment processing fees). Operating margin goes further and subtracts overhead like R&D and sales expenses. A company can have decent gross margins but still lose money at the operating level if it's spending aggressively to grow.
Toast has been making progress on margins by increasing software attach rates and growing its subscription revenue, but the gap between Toast and a company like Lightspeed on gross margin is real. Investors evaluating the TOST peer group should pay close attention to gross margin trends over multiple quarters rather than relying on a single snapshot.
What do valuation multiples tell us about TOST vs sector pricing?
Valuation is where opinions diverge sharply. High-growth, low-margin companies tend to trade on revenue multiples (EV/Revenue or Price/Sales), while more mature, profitable companies trade on earnings-based multiples (P/E, EV/EBITDA). Toast often falls into the revenue-multiple camp, which makes direct comparisons tricky.
A few principles to keep in mind when comparing valuation across this peer group:
- Growth-adjusted multiples matter. A company trading at 8x revenue but growing at 40% annually may be cheaper than one trading at 4x revenue growing at 10%. The PEG ratio concept applies here, even for pre-earnings companies.
- Margin trajectory should influence what multiple you accept. If Toast is on a clear path to mid-teens operating margins, a higher revenue multiple makes more sense than if margins are stagnant.
- Total addressable market (TAM) narratives can inflate multiples. Toast's restaurant-only focus gives it a more bounded TAM than Block, which touches many merchant categories. That should, in theory, mean a more modest multiple.
Historically, Toast has traded at a premium to Lightspeed on a revenue basis, partly because of faster growth and a larger U.S. restaurant market opportunity. It has traded at a discount to Block, which benefits from a much broader platform narrative. Shift4 tends to sit somewhere in the middle, with its valuation reflecting both its growth rate and its improving margin profile.
You can pull up current valuation multiples for TOST and compare them yourself on the Toast stock research page on Rallies.ai.
Return on invested capital: the metric most investors skip
ROIC is arguably the most important metric in this entire comparison, and it's the one that gets the least attention. Revenue growth and valuation multiples grab headlines, but ROIC tells you whether a company is actually creating value with the capital it deploys.
Return on invested capital (ROIC): A measure of how efficiently a company turns its invested capital (equity plus debt minus excess cash) into operating profits. An ROIC above a company's cost of capital means it's creating value; below it means it's destroying value, no matter how fast revenue grows.
For a company like Toast that has been reinvesting heavily in growth, ROIC can look ugly in the early years. That's not necessarily a problem if the investments are generating improving returns over time. The question is whether the trend is moving in the right direction.
Among the peer group:
- Block has the longest track record and, as a more mature business, tends to show more stable ROIC figures, though its aggressive expansion into areas like Afterpay has pressured returns.
- Shift4 has been generating increasingly positive returns, partly because its acquisition strategy has targeted businesses with immediate revenue contribution.
- Lightspeed has struggled with ROIC, particularly after a series of acquisitions that diluted returns before contributing meaningfully to profitability.
- Toast is still early in its ROIC maturation, but the direction matters more than the absolute number right now.
If you're building a long-term investment thesis, tracking ROIC improvement over several periods gives you a better signal than looking at a single quarter's revenue beat. You can explore this kind of multi-metric analysis using the Rallies AI Research Assistant, which lets you compare financial metrics across companies side by side.
Where does Toast look stronger or weaker?
Pulling it all together, here's a simplified framework for how Toast stacks up across these four dimensions:
Where Toast looks stronger:
- Revenue growth — Toast's organic growth rate has been at or near the top of its peer group, driven by strong restaurant location additions and increasing revenue per location.
- Vertical focus — Being the dominant restaurant-specific platform gives Toast deep product-market fit and high switching costs within its niche.
- Platform expansion — Toast has been adding financial products (lending, insurance, payroll) that increase lifetime value per customer.
Where Toast looks weaker:
- Profit margins — The heavy payments processing mix keeps blended margins below most software-oriented peers.
- ROIC maturity — Still early in the capital return cycle, making it harder to prove long-term value creation compared to more established peers like Block.
- TAM constraints — A restaurant-only platform faces a more bounded growth ceiling than diversified commerce platforms, which could compress valuation multiples over time.
None of these strengths or weaknesses exist in isolation. A strong growth rate with poor margins might be fine if margins are improving. A narrow TAM might be acceptable if the company is capturing an outsized share. The point of a peer comparison is to surface these tradeoffs, not to declare a winner.
How to build your own peer comparison
If you want to run a similar analysis for Toast or any other company, here's a straightforward process:
- Define your peer group — Pick 3-4 companies with overlapping business models, customer segments, or industry verticals. Avoid comparing companies that look similar on the surface but operate in fundamentally different markets.
- Choose your metrics — Revenue growth, gross margin, operating margin, valuation multiples (EV/Revenue, EV/EBITDA), and ROIC cover most of what you need. Don't overcomplicate it.
- Look at trends, not snapshots — One period's data can be misleading. Look at multi-period trends to see direction and consistency.
- Contextualize the numbers — A 30% growth rate means something different for a company with 80% gross margins than one with 20% gross margins. Always ask what's driving the number.
- Check your assumptions — If you're paying a premium multiple for a company, write down the specific reasons why. If those reasons don't hold up, the multiple probably won't either.
The Rallies stock screener can help you identify potential peer companies based on sector, market cap, and financial characteristics. From there, you can dig into individual stock pages for detailed metric breakdowns.
Try it yourself
Want to run this kind of analysis on your own? Copy any of these prompts and paste them into the Rallies AI Research Assistant:
- Compare Toast to its 3-4 closest competitors on revenue growth, profit margins, valuation multiples, and return on invested capital — which companies are in the peer group, and where does Toast look stronger or weaker?
- How does Toast stack up against 3-4 industry peers on the metrics that matter most?
- What are the biggest margin improvement levers for Toast compared to Shift4, Lightspeed, and Block over the next few years?
Frequently asked questions
What companies are in the Toast peer group?
The most commonly used peers for Toast include Shift4 Payments (FOUR), Lightspeed Commerce (LSPD), and Block/Square (SQ). Some analysts also include Olo (OLO) or NCR Voyix for restaurant-specific comparisons. The right peer group depends on whether you're comparing Toast as a payments company, a SaaS platform, or a vertical software business.
How does the TOST vs sector comparison look on revenue growth?
Toast has generally posted revenue growth rates at or near the top of its peer group, driven by rapid restaurant location additions and increasing revenue per location. However, a significant portion of that revenue comes from payment processing, which carries thinner margins than software subscriptions. Growth quality matters as much as growth speed.
Why are Toast's profit margins lower than its peers?
Toast generates a large percentage of revenue from payment processing, which typically carries gross margins in the low-to-mid teens. Software-heavier peers like Lightspeed or even Shift4 have a more favorable revenue mix that lifts their blended gross margins. Toast has been working to shift this mix by growing its subscription and financial services products.
What is ROIC and why does it matter for a TOST industry comparison?
ROIC, or return on invested capital, measures how well a company converts its invested capital into operating profits. For a TOST industry comparison, ROIC helps you see whether the money Toast is pouring into growth is generating adequate returns compared to peers. A company can grow revenue fast but still destroy value if its ROIC stays below its cost of capital.
Does Toast deserve a valuation premium over its peers?
That depends on your assumptions about margin improvement, market share gains, and TAM expansion. Toast's faster growth rate and dominant position in restaurant technology support a premium, but its thinner margins and narrower addressable market work against it. Investors should weigh both sides and decide what they're comfortable paying for the growth trajectory.
How can I run my own Toast peer comparison?
Start by identifying 3-4 companies with similar business models or customer segments. Then compare them across revenue growth, gross and operating margins, valuation multiples, and ROIC. Use multi-period data rather than single snapshots, and always contextualize the numbers by looking at revenue quality and margin trends. Tools like the Rallies AI Research Assistant can speed up this process.
Is Toast a good investment compared to its peers?
Whether Toast is a good fit for any portfolio depends on individual risk tolerance, investment timeline, and how you weigh growth versus profitability. A peer comparison provides useful context but doesn't replace personal due diligence. Consider consulting a qualified financial advisor before making any investment decisions.
Bottom line
A thorough Toast vs industry peers analysis shows a company with strong revenue growth and deep vertical focus, but with margin and ROIC profiles that trail several competitors. The peer group comparison doesn't produce a simple winner. It surfaces the tradeoffs you need to weigh when deciding if TOST's valuation makes sense relative to Shift4, Lightspeed, Block, and others in the space.
To keep building your research skills, explore more frameworks for evaluating stocks on the Rallies stock analysis blog, and use the tools on Rallies.ai to run your own side-by-side comparisons.
Disclaimer: This article is for educational and informational purposes only. It does not constitute investment advice, financial advice, trading advice, or any other type of advice. Rallies.ai does not recommend that any security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. All investments involve risk, including the possible loss of principal. Past performance does not guarantee future results. Before making any investment decision, consult with a qualified financial advisor and conduct your own research.
Written by Gav Blaxberg, CEO of WOLF Financial and Co-Founder of Rallies.ai.
