Since February 2025, Affirm has been in a holding pattern, posting a small loss of 1.6% while floating around $73.44. The stock also fell short of the S&P 500’s 4.7% gain during that period.
Is now the time to buy Affirm, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is Affirm Not Exciting?
We're cautious about Affirm. Here are two reasons why AFRM doesn't excite us and a stock we'd rather own.
1. Previous Growth Initiatives Have Lost Money
Return on equity (ROE) measures how effectively banks generate profit from each dollar of shareholder equity - a critical funding source. High-ROE institutions typically compound shareholder wealth faster over time through retained earnings, share repurchases, and dividend payments.
Over the last five years, Affirm has averaged an ROE of negative 23.8%, a bad result not only in absolute terms but also relative to the majority of firms putting up 25%+. It also shows that Affirm has little to no competitive moat.
2. High Debt Levels Increase Risk
Affirm reported $2.13 billion of cash and $7.32 billion of debt on its balance sheet in the most recent quarter.
As investors in high-quality companies, we primarily focus on whether a company’s profits can support its debt.
With $744.3 million of EBITDA over the last 12 months, we view Affirm’s 7.0× net-debt-to-EBITDA ratio as safe. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.
Final Judgment
Affirm isn’t a terrible business, but it isn’t one of our picks. With its shares lagging the market recently, the stock trades at 35.2× forward P/E (or $73.44 per share). This valuation tells us a lot of optimism is priced in - we think there are better stocks to buy right now. Let us point you toward a safe-and-steady industrials business benefiting from an upgrade cycle.
Stocks We Like More Than Affirm
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