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2 Affordable Software Stocks to Buy for a Rebound: FRSH, TOST
The software sector has faced heightened volatility over the past year as investors sort through the winners and losers of the AI revolution.
While AI is expected to drive a new wave of productivity and innovation, concerns that some software products could face disruption have pressured the sector.
That said, software companies that continue to deliver strong execution and improving profitability are beginning to stand out. As earnings estimates move higher and sentiment improves, several beaten-down software stocks appear positioned for a rebound, with Freshworks (FRSH - Free Report) ) and Toast (TOST - Free Report) ) standing out in particular.
Notably, both stocks have recently earned a coveted Zacks Rank #1 (Strong Buy), reflecting positive earnings estimate revisions and improving business fundamentals.
Freshworks is a Customer Experience Leader Trading at a Discount
Freshworks provides cloud-based customer engagement, IT service management, and CRM software solutions for businesses of all sizes. The company has built a reputation for delivering user-friendly software at a lower cost than many larger enterprise competitors.
Attributing to its strong buy rating, earnings revisions are nicely up for Freshworks in the last 60 days, with FY26 and FY27 EPS estimates spiking over 10% and 14%, respectively. Freshworks annual earnings are now expected to dip 6% this year but are projected to rebound and spike 25% in FY27 to $0.78 per share.
Image Source: Zacks Investment Research
Reassuringly, Freshworks' top line is projected to expand roughly 14% in FY26 and FY27, with the company on the cusp of bringing in $1 billion in annual sales.
Correlating with such, Freshworks continues to benefit from growing demand for digital customer service and employee support tools. As organizations seek to improve efficiency while controlling costs, Freshworks' product suite remains well-positioned to capture market share.
Despite these strengths, Freshworks stock is still trading nearly 20% below its 52-week high of $16 a share, allowing investors to gain exposure to a growing software company at a very reasonable valuation of 15X forward earnings.
If management continues to execute and profitability improves, FRSH could be positioned for a meaningful rebound.
Image Source: Zacks Investment Research
Toast’s Restaurant Technology Growth Story Remains Intact
Emerging as one of the leading technology platforms serving the restaurant industry, Toast’s cloud-based ecosystem combines point-of-sale systems, payment processing, payroll, scheduling, analytics, and online ordering tools into a single platform.
Supported by strong operational performance and improving earnings expectations, Toast continues to expand its customer base, serving approximately 171,000 restaurant locations worldwide. The company's recurring revenue model provides significant long-term growth potential as existing customers adopt additional services and new locations join the platform.
While macroeconomic concerns have weighed on restaurant spending, Toast's growing profitability and expanding ecosystem suggest that the business remains on a strong trajectory. Plus, in the last 60 days, Toast’s FY26 and FY27 EPS estimates are up over 3% respectively.
Image Source: Zacks Investment Research
Aforementioned, Toast’s growth trajectory is very intriguing, with EPS now expected to soar 50% this year and projected to spike another 29% next year to $1.74 per share. This comes as annual sales are forecasted to increase nearly 20% in FY26 and are projected to spike over 17% in FY27 to $8.68 billion.
Investors looking for an affordable software stock with both growth and margin expansion potential may find TOST particularly attractive at under $25. Trading at a reasonable 18X forward earnings multiple, Toast stock is still more than 50% from a one-year high of $49 a share.
Image Source: Zacks Investment Research
Summary & Conclusion
Freshworks and Toast share several characteristics that make them compelling rebound candidates. Most notably, they both operate in growing software markets and have increased their focus on profitability and cash flow generation while having business models that provide recurring revenue, stability, and scalability.
For investors seeking affordable software stocks that should be in store for a rebound given their attractive growth prospects, Freshworks and Toast deserve a closer look.
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2 Affordable Software Stocks to Buy for a Rebound: FRSH, TOST
The software sector has faced heightened volatility over the past year as investors sort through the winners and losers of the AI revolution.
While AI is expected to drive a new wave of productivity and innovation, concerns that some software products could face disruption have pressured the sector.
That said, software companies that continue to deliver strong execution and improving profitability are beginning to stand out. As earnings estimates move higher and sentiment improves, several beaten-down software stocks appear positioned for a rebound, with Freshworks (FRSH - Free Report) ) and Toast (TOST - Free Report) ) standing out in particular.
Notably, both stocks have recently earned a coveted Zacks Rank #1 (Strong Buy), reflecting positive earnings estimate revisions and improving business fundamentals.
Freshworks is a Customer Experience Leader Trading at a Discount
Freshworks provides cloud-based customer engagement, IT service management, and CRM software solutions for businesses of all sizes. The company has built a reputation for delivering user-friendly software at a lower cost than many larger enterprise competitors.
Attributing to its strong buy rating, earnings revisions are nicely up for Freshworks in the last 60 days, with FY26 and FY27 EPS estimates spiking over 10% and 14%, respectively. Freshworks annual earnings are now expected to dip 6% this year but are projected to rebound and spike 25% in FY27 to $0.78 per share.
Image Source: Zacks Investment Research
Reassuringly, Freshworks' top line is projected to expand roughly 14% in FY26 and FY27, with the company on the cusp of bringing in $1 billion in annual sales.
Correlating with such, Freshworks continues to benefit from growing demand for digital customer service and employee support tools. As organizations seek to improve efficiency while controlling costs, Freshworks' product suite remains well-positioned to capture market share.
Despite these strengths, Freshworks stock is still trading nearly 20% below its 52-week high of $16 a share, allowing investors to gain exposure to a growing software company at a very reasonable valuation of 15X forward earnings.
If management continues to execute and profitability improves, FRSH could be positioned for a meaningful rebound.
Image Source: Zacks Investment Research
Toast’s Restaurant Technology Growth Story Remains Intact
Emerging as one of the leading technology platforms serving the restaurant industry, Toast’s cloud-based ecosystem combines point-of-sale systems, payment processing, payroll, scheduling, analytics, and online ordering tools into a single platform.
Supported by strong operational performance and improving earnings expectations, Toast continues to expand its customer base, serving approximately 171,000 restaurant locations worldwide. The company's recurring revenue model provides significant long-term growth potential as existing customers adopt additional services and new locations join the platform.
While macroeconomic concerns have weighed on restaurant spending, Toast's growing profitability and expanding ecosystem suggest that the business remains on a strong trajectory. Plus, in the last 60 days, Toast’s FY26 and FY27 EPS estimates are up over 3% respectively.
Image Source: Zacks Investment Research
Aforementioned, Toast’s growth trajectory is very intriguing, with EPS now expected to soar 50% this year and projected to spike another 29% next year to $1.74 per share. This comes as annual sales are forecasted to increase nearly 20% in FY26 and are projected to spike over 17% in FY27 to $8.68 billion.
Investors looking for an affordable software stock with both growth and margin expansion potential may find TOST particularly attractive at under $25. Trading at a reasonable 18X forward earnings multiple, Toast stock is still more than 50% from a one-year high of $49 a share.
Image Source: Zacks Investment Research
Summary & Conclusion
Freshworks and Toast share several characteristics that make them compelling rebound candidates. Most notably, they both operate in growing software markets and have increased their focus on profitability and cash flow generation while having business models that provide recurring revenue, stability, and scalability.
For investors seeking affordable software stocks that should be in store for a rebound given their attractive growth prospects, Freshworks and Toast deserve a closer look.