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Cramer: Toast Too Hot to Handle at Current Prices

Restaurant technology company appears priced to perfection.

Jim Cramer said buyers of Toast TOST are likely to get burned by initial prices, despite a promising sector and a spectacular first day of trading, that saw shares rise 56%.

In the "Know Your IPO" segment of a recent "Mad Money" episode, Cramer said he loves the restaurant technology space. Apparently so does Wall Street, with shares of Square  (SQ) - Get Square, Inc. Class A Report, Lightspeed LSPD and Par Technology Corp.  (PAR) - Get PAR Technology Corporation Report all seeing big gains. Toast is another player, with 29,000 customers using its integrated platform that provides everything from online ordering, to delivery, to point-of-sale technology. The only problem? There are a lot of other companies that do exactly what Toast does.

But Cramer said that alone wouldn't turn him away from the stock. What would is the company's sky-high valuation that has shares trading at 19 times sales. That means Toast is priced for perfection and investors are likely to get a little scorched.  Find out more about Real Money columnists' investing ideas here.

Cramer said he's also not a fan of this "sliver deal," which sold only five million shares of the Toast's 500-million-share float. With tiered lockup expirations coming down the pike, there is likely to be a lot of selling pressure in the near future.

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At lower levels, Cramer said he'd be a buyer of Toast, but at these prices, he simply cannot recommend it.

Toast is a cloud-based restaurant software company, which helps restaurants with online ordering.

Headquartered in Boston, Mass., the company was founded by Aman Narang, Jon Grimm, and Steve Fredette.

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