If you're in the restaurant business, you may well have heard of Toast (TOST 3.42%). The company provides a range of software-as-a-service products and financial solutions for restaurants. The goal: allowing owners and operators to better manage their locations via a digital toolkit that allows for smooth functioning and minimal disruption. In other words, Toast aims to be a restaurant's all-in-one operating system.

However, the growth tech stock hasn't really taken very good care of its shareholders. It's down 66% from its all-time high. On the bright side, the stock has climbed 56% in the last three months. Could it continue this newfound momentum over the next few years? Let's take a closer look.

Growth is the key ingredient

While macro headwinds persist, Toast keeps registering impressive growth as it captures what management believes is a $55 billion domestic market opportunity. The company added 6,500 restaurant locations to its customer base in the last three months of 2023, bringing the total to 106,000. Given that there are 860,000 restaurants in the U.S., there is still huge potential to bring on more clients.

Revenue in Q4 totaled $1 billion, up 35% year over year. Annualized recurring revenue, a key metric management follows that measures the success of subscriptions and payment processing services, was $1.2 billion last quarter. For the full year, gross profit surged 63%, indicating that growth is still the key aspect of Toast's story.

Management's strategy involves continuing to introduce new product features -- like payroll, digital storefronts, and marketing -- to become even more important and mission-critical to its customer base. This creates switching costs, discouraging restaurants from leaving Toast for another platform.

The business has done a wonderful job at becoming a well-known brand within its industry. Roughly 75% of new locations come from inbound channels. Delighting customers has resulted in powerful word-of-mouth advertising, something any company loves to have.

Hinting at profitability

Like many tech-focused and growth-oriented peers, Toast has emphasized cutting costs. Executives just announced the layoff of 550 employees, which they estimate can lead to annual expense reductions of $100 million.

Perhaps this trend of driving greater efficiencies is why the leadership team expects Toast to generate positive operating income in the first half of 2025. That would be an impressive financial milestone for a company that up until this point has been solely interested in investing aggressively to achieve growth.

The income statement has already been showing signs of improvement. Toast reported a net loss of $36 million in Q4 2023, down from $99 million in Q4 2022. The business is benefiting from the fact that operating expenses are growing at a slower pace than sales.

While the Federal Reserve has hinted at multiple interest rate cuts this year, there is still the very real possibility that the U.S. could see higher interest rates for a longer period of time. And by that, I mean higher rates than what has been the case for most of the past decade.

In this scenario, investors are definitely going to prioritize owning businesses that are financially disciplined and generating consistent profits. Wall Street analysts' consensus estimate calls for Toast to generate earnings per share of $0.80 in 2026, much better than the $0.47-per-share loss last year.

The stock has potential

With Toast shares significantly below their peak price, the stock trades at a price-to-sales multiple of 3.1. I don't view this as expensive given the tremendous growth potential Toast has ahead of it.

There are reasons to be optimistic about the company continuing to attract more customers, grow its revenue, and improve the bottom line. This should give investors confidence in Toast's ability to beat the market over the next three years.