Should a user consider purchasing or selling Affirm Holdings stock when its price is at $82?
Affirm Holdings, a leading provider of buy now, pay later (BNPL) services, has shown a strong performance over the past few years, with an average revenue growth of 34.3% over the last three years and a recent quarterly revenue growth of 33.0% to $876 million. However, its current valuation of 9.4 times trailing revenue suggests limited upside potential in the near term, as this is slightly higher than its three-year average price-to-sales ratio of 8.9.
On Tuesday, September 2, the stock took a hit due to the news that Klarna, a competitor, announced its plan for a U.S. Initial Public Offering (IPO). This event highlighted the competitive nature of the BNPL market and added an element of risk to Affirm's stock.
The stock's history of significant declines during economic downturns is another factor that introduces risk. For instance, during the Inflation Shock (2022), AFRM stock fell 94.7% from a high of $168.52 to $8.91, while the S&P 500 experienced a peak-to-trough decline of 25.4%.
Despite these challenges, Affirm's performance can be summarised as follows: Growth - Very Strong, Profitability - Moderate, Financial Stability - Strong, Downturn Resilience - Weak. The company's net income for the last four-quarter period was $52 million, indicating a very poor net income margin of 1.6%. However, its operating cash flow (OCF) over the same period was $794 million, pointing to a high OCF margin of 24.6%. Its operating income over the last four quarters was $338 million, representing a moderate operating margin of 10.5%.
Affirm's stock price currently stands at approximately $82. Cash makes up 20.0% of Affirm's Total Assets, yielding a stronger Cash-to-Assets Ratio compared to the S&P 500's ratio of 7.2%. Additionally, Affirm's Debt-to-Equity Ratio at the end of the most recent quarter was 27.1%, which is stronger than the S&P 500's ratio of 20.3%.
However, Affirm's price-to-free cash flow (P/FCF) ratio is 48.1, compared to 21.4 for the S&P 500. Similarly, its price-to-sales (P/S) ratio is 9.0, compared to 3.3 for the S&P 500, suggesting that Affirm Holdings stock appears relatively expensive compared to the broader market.
Despite these concerns, Affirm Holdings stock has seen a 40% year-to-date surge. It showed a recent gain of about 1.93% on July 25, 2025, and has been in a strong rising trend in the short term, with a forecasted increase of approximately 42.44% over the next three months. This performance appears to be positive but somewhat volatile, although exact comparative figures for the S&P 500's recent change at the same period are not provided, making a precise ratio calculation unavailable based on current data.
It's worth noting that the Trefis High Quality (HQ) Portfolio, a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period due to providing better returns with less risk. This could potentially make Affirm Holdings a less attractive investment compared to the HQ Portfolio, given its higher valuation and weaker downturn resilience.
In conclusion, while Affirm Holdings has shown strong growth and financial stability, its current valuation and historical performance during downturns introduce an element of risk. Investors should carefully consider these factors before making investment decisions.
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