PAR Technology (PAR)

Restaurant technology provider PAR Technology (NYSE:PAR) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 23.2% year on year to $119.2 million. Its non-GAAP profit of $0.06 per share was significantly above analysts’ consensus estimates.

Company Overview

Originally founded in 1968 as a defense contractor for the U.S. government, PAR Technology (NYSE:PAR) provides cloud-based software, payment processing, and hardware solutions that help restaurants manage everything from point-of-sale to customer loyalty programs.

Companies in this sector, especially if they invest wisely, could see demand tailwinds as the world moves towards more IoT (Internet of Things), automation, and analytics. Enterprises across most industries will balk at taking these journeys solo and will enlist companies with expertise and scale in these areas. However, headwinds could include rising competition from larger technology firms, as digitization lowers barriers to entry in the space. Additionally, companies in the space will likely face evolving regulatory scrutiny over data privacy, particularly for surveillance and security technologies. This could make companies have to continually pivot and invest.

PAR Technology competes with other restaurant technology providers such as Toast (NYSE:TOST), NCR Voyix (NYSE:VYX), Oracle (NYSE:ORCL), and Square (NYSE:SQ), as well as specialized loyalty and ordering platforms like Olo (NYSE:OLO).

A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years.

With $440.5 million in revenue over the past 12 months, PAR Technology is a small player in the business services space, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and numerous distribution channels. On the bright side, it can grow faster because it has more room to expand.

As you can see below, PAR Technology’s sales grew at an incredible 16.2% compounded annual growth rate over the last five years. This shows it had high demand, a useful starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. PAR Technology’s annualized revenue growth of 20.3% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

PAR Technology also reports its annual recurring revenue (ARR), or the revenue it expects to generate from its existing customer base in the next 12 months. PAR Technology’s ARR reached $298.4 million in the latest quarter and averaged 56.6% year-on-year growth over the last two years. Because this number is better than its normal revenue growth, we can see the company generated more revenue from its existing customers than new customers. Holding everything else constant, this is a positive sign as it should lead to lower sales and marketing expenses.

This quarter, PAR Technology reported robust year-on-year revenue growth of 23.2%, and its $119.2 million of revenue topped Wall Street estimates by 5.8%.

Looking ahead, sell-side analysts expect revenue to grow 11.7% over the next 12 months, a deceleration versus the last two years. Despite the slowdown, this projection is commendable and suggests the market is baking in success for its products and services.

PAR Technology’s high expenses have contributed to an average operating margin of negative 19.6% over the last five years. Unprofitable business services companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.

On the plus side, PAR Technology’s operating margin rose by 3.6 percentage points over the last five years, as its sales growth gave it operating leverage. Still, it will take much more for the company to reach long-term profitability.

In Q3, PAR Technology generated a negative 14.8% operating margin.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

PAR Technology’s full-year EPS flipped from negative to positive over the last five years. This is a good sign and shows it’s at an inflection point.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For PAR Technology, its two-year annual EPS growth of 43.4% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q3, PAR Technology reported adjusted EPS of $0.06, up from negative $0.09 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects PAR Technology’s full-year EPS of $0.08 to grow 432%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

PAR Technology’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 13.4%, meaning it lit $13.44 of cash on fire for every $100 in revenue.

Taking a step back, an encouraging sign is that PAR Technology’s margin expanded by 16.9 percentage points during that time. In light of its glaring cash burn, however, this improvement is a bucket of hot water in a cold ocean.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

PAR Technology’s five-year average ROIC was negative 9.3%, meaning management lost money while trying to expand the business. Its returns were among the worst in the business services sector.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, PAR Technology’s ROIC averaged 2.8 percentage point increases each year. This is a good sign, and if its returns keep rising, there’s a chance it could evolve into an investable business.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

PAR Technology’s $400.3 million of debt exceeds the $107.4 million of cash on its balance sheet. Furthermore, its 13× net-debt-to-EBITDA ratio (based on its EBITDA of $21.7 million over the last 12 months) shows the company is overleveraged.

At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. PAR Technology could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.

We hope PAR Technology can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.

It was good to see PAR Technology beat analysts’ EPS expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. On the other hand, its ARR missed. Zooming out, we think this quarter featured some important positives. The stock traded up 5.4% to $35 immediately after reporting.

Updated: December 3, 2025 at 11:25 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in PAR Technology.

Aside from its balance sheet, PAR Technology is a pretty good company. First of all, the company’s revenue growth was exceptional over the last five years. And while its relatively low ROIC suggests management has struggled to find compelling investment opportunities, its ARR growth has been marvelous. Additionally, PAR Technology’s rising cash profitability gives it more optionality.

PAR Technology’s P/E ratio based on the next 12 months is 84x. Certain aspects of its fundamentals are attractive, but we aren’t investing at the moment because its balance sheet makes us uneasy. Interested in this company and its prospects? We recommend you wait until it generates sufficient cash flows or raises money.

Wall Street analysts have a consensus one-year price target of $59.33 on the company (compared to the current share price of $35.02).