Investing requires two skills: evaluating good business opportunities and determining a good price to pay. When it comes to restaurant technology company Toast (NYSE: TOST), allow me to start with the price to pay, otherwise known as the valuation.

At $19 per share, Toast would have a market capitalization of about $10 billion. The company has generated almost $3.6 billion in trailing-12-month revenue. Therefore, trading at $19 per share or lower, Toast stock has a price-to-sales (P/S) valuation of less than 3.

In isolation, Toast's valuation is quite reasonable, which might motivate investors to buy shares while they're still below $19 -- they trade at $17.24 as of this writing. But to determine whether or not Toast stock is a good buy, investors must solve for the other half of the equation and evaluate whether this is a good business opportunity.

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Source Fool.com