Because it doesn't sell consumer-facing products and services, many people might not be familiar with Toast (TOST 3.42%), which views itself as the operating system of the restaurants that it serves. The business sells point-of-sale hardware solutions and offers various software and service tools for accepting payments, managing payroll, setting up loyalty programs, and making loans that all make it easier to manage a restaurant location.

Shares of this SaaS enterprise are currently trading 72% below their all-time high. But don't let the market's punishment discourage you. Here are three reasons you should consider buying Toast like there's no tomorrow.

Growth is a key part of the story

Ever since Toast was founded in 2012, its growth has been jaw-dropping. Revenue in the third quarter of 2023 (ended Sept. 30) was up 37% year over year, and it was 112% higher than the same period two years ago. Despite macroeconomic headwinds like higher interest rates and inflationary pressures, Toast continues expanding at a brisk pace.

It's not surprising. The business has developed products and services that are in huge demand in the restaurant sector. This shows that Toast is solving a critical problem, which is just how complex and difficult it can be to find back-end solutions from multiple providers to better operate a restaurant. Toast's all-in-one and end-to-end offerings make life easier for owners and managers.

Toast currently has a customer base of 99,000 restaurants, representing more than 10% share in the U.S. -- so there is a huge total addressable market to penetrate. There are 860,000 restaurant locations in this country and 22 million worldwide. Moreover, it is estimated that restaurants will spend $55 billion on tech efforts in the U.S. This means Toast's annualized sales of $4 billion are a tiny share of the overall market.

With the constant introduction of new features, it's easy to see that Toast will continue to provide a compelling proposition for existing and new users. And this should lead to strong growth in the years ahead.

An economic moat is present

An economic moat is a set of characteristics that helps a specific business outperform competitors and discourage new entrants from entering the industry. You usually only see this with more established businesses. That's why it's surprising to see Toast already showing signs of having an economic moat.

More specifically, the company benefits from switching costs. The decision for a restaurant operator to want to change to a different service provider has to be a difficult one, given the potential disruptions it can cause on a day-to-day basis.

Toast's rapid growth thus far demonstrates that it is providing a valuable service to customers. I suspect once managers and employees of a restaurant get familiar with Toast's hardware and software, and figure out how seamless and beneficial it is, they have no intention to switch to competing providers. This lock-in is extremely valuable for Toast.

The company might also be building a well-recognized brand within the industry. Toast mentioned that 20% of new customers come from referrals. Again, this goes to show just how fantastic Toast's product offering is. But maybe more importantly, over time it could help drive down marketing expenses for the business. And this could lead to consistent profits down the road.

The setup is favorable for investors

Investors remain pessimistic about Toast as its stock sits significantly lower than its all-time high. It also doesn't help that shares were up only 1% last year, while the broader Nasdaq Composite index skyrocketed 43%.

As a result of this poor performance, shares currently trade at a price-to-sales ratio of 2.7. That's a huge discount to Toast's historical average valuation. And it presents investors with a very favorable setup to buy a competitively advantaged business at a cheap price.