Affirm Holdings (NASDAQ: AFRM), a financial technology company offering buy now, pay later and point-of-sale payment solutions, has seen its stock decline nearly 30% this year. This drop is primarily due to growing concerns about the broader economic environment. In particular, President Trump’s tariffs on trading partners have heightened fears of negative impacts on the U.S. economy and consumer spending. China’s stronger-than-expected retaliatory tariffs have further intensified this situation, fueling a global trade war and a downturn in world markets.
These macroeconomic headwinds present specific challenges for Affirm. Persistently high inflation could prevent the U.S. Federal Reserve from cutting interest rates further, negatively impacting Affirm’s lending business. Moreover, a potential economic recession would likely reduce demand for the company’s financial products.
Given these factors, we maintain a negative outlook on Affirm’s stock, viewing it as an unattractive investment at its current price of roughly $44 due to key concerns and its high valuation. Our conclusion stems from comparing AFRM’s current valuation with its recent operating performance and financial history. Evaluating key parameters—Growth, Profitability, Financial Stability, and Downturn Resilience—shows Affirm’s operating performance and financial condition to be moderate, as detailed below. However, if you prefer upside with lower volatility than individual stocks, the Trefis High-Quality portfolio offers an alternative, having outperformed the S&P 500 with returns exceeding 91% since inception.
How Does Affirm’s Valuation Compare to the S&P 500?
Based on price per dollar of sales or profit, AFRM stock appears slightly expensive relative to the broader market.
- Affirm has a price-to-sales (P/S) ratio of 4.7 vs. a figure of 2.8 for the S&P 500
- Additionally, the company’s price-to-free cash flow (P/FCF) ratio is 16.7 compared to 17.6 for the S&P 500
How Have Affirm’s Revenues Grown Over Recent Years?
Affirm’s Revenues have grown considerably over recent years.
- Affirm has seen its top line grow at an average rate of 35.8% over the last 3 years (vs. increase of 6.2% for the S&P 500)
- Its revenues have grown 46.3% from $1.9 Bil to $2.8 Bil in the last 12 months (vs. growth of 5.3% for the S&P 500)
- Also, its quarterly revenues grew 46.6% to $866 Mil in the most recent quarter from $591 Mil a year ago (vs. 4.9% improvement for the S&P 500)
How Profitable Is Affirm?
Affirm’s profit margins lag behind most companies in the Trefis coverage universe.
- Affirm’s Operating Income over the last four quarters was $31 Mil, reflecting a very poor Operating Margin of 1.1% (vs. 13.1% for the S&P 500)
- Affirm’s Operating Cash Flow over this period was $786 Mil, pointing to a high OCF Margin of 28.1% (vs. 15.7% for the S&P 500)
- For the last four-quarter period, Affirm’s Net Income was $-199 Mil — indicating a very poor Net Income Margin of -7.1% (vs. 11.3% for the S&P 500)
Does Affirm Look Financially Stable?
Affirm’s balance sheet appears sound.
- Affirm’s Debt at the end of the most recent quarter was $7.5 Bil, compared to a market capitalization of $13 Bil (as of 4/21/2025). This implies a poor Debt-to-Equity Ratio of 57.1% (vs. 21.5% for the S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
- Affirm’s cash (including cash equivalents) accounted for $1.9 Bil of its $10 Bil in total assets, yielding a strong Cash-to-Assets Ratio of 17.8% (vs. 15.0% for the S&P 500)
How Resilient Is AFRM Stock During A Downturn?
AFRM stock has fared much worse than the S&P 500 index during the economic downturn of 2022. While investors hope for a soft landing, there remains the risk of severe losses if another recession occurs. Our dashboard How Low Can Stocks Go During A Market Crash illustrates how key stocks performed during and after the six most significant market crashes.
Inflation Shock (2022)
- AFRM stock fell 90.6% from a high of $95.21 on 3 January 2022 to $8.91 on 27 December 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
- The stock is yet to recover to its pre-Crisis high
- The highest the stock has reached since then is $80.98 on 18 February 2025 and currently trades at around $44
Putting All The Pieces Together: What It Means For AFRM Stock
In summary, Affirm’s performance across the parameters detailed above is as follows:
- Growth: Extremely Strong
- Profitability: Very Weak
- Financial Stability: Neutral
- Downturn Resilience: Extremely Weak
- Overall: Neutral
Even though Affirm’s performance across key fundamental factors appears moderate, we believe its current high valuation makes the stock an unattractive investment at its present price. Moreover, the prevailing macroeconomic uncertainties, coupled with increasing recession risks and elevated interest rates, suggest that AFRM stock could experience further decline.
While AFRM stock may be best avoided for now, consider the Trefis Reinforced Value Portfolio, which has outperformed its all-cap benchmark (combining the S&P 500, S&P mid-cap, and Russell 2000 indices) to deliver strong investor returns. Why is that? The quarterly rebalanced mix of large-, mid-, and small-cap RV Portfolio stocks offers a responsive strategy to capitalize on market upswings while mitigating losses during downturns, as detailed in RV Portfolio performance metrics.
Invest with Trefis
Market Beating Portfolios | Rules-Based Wealth
Read the full article here
