Toast shares have fallen to their lowest-ever level on an NTM price-to-normalized-earnings multiple, while Wall Street price targets have risen. At the same time, the decline in the FCF margin and insider selling have been flagged.
Toast shares' NTM price-to-normalized-earnings multiple closed at 19.36x on 18 September, marking the lowest level since the company went public. This was well below the five-year average of approximately 51.07x, indicating that the market valuation appears extremely low despite continued revenue growth. The shares had fallen sharply from their level at the end of June, declining from around $36 at their summer peak to $29.74.
Wall Street analysis showed that Toast's average price target changed from $33.88 on 30 June to $38.92 on 18 September, while buy ratings increased. Price targets were raised to a level equivalent to approximately 131% of the share price, with no underperform or sell ratings. This has created a divergence between the market and analysts.
The key risk identified is the decline in cash flow margins, with the FCF margin falling to 6.81% in the second quarter. The decline is attributed to the buildup of hardware inventory ahead of demand and has continued from the 10.9% recorded in the fourth quarter of 2025. Share sales by the CRO and CFO, as well as the disposal of shares held by the CEO's charitable trust, have also been reported, bringing insider activity into focus.
The focus will be on whether this improves in the next earnings release. If the FCF margin recovers, the multiple could still appear undervalued. If margins remain compressed for 3 consecutive quarters, however, it could prompt the view that the current share price reflects reality. Monitoring the trend in this metric is considered important for investment decisions.