After Leaping 26% Affirm Holdings, Inc. (NASDAQ:AFRM) Shares Are Not Flying Under The Radar

Despite an already strong run, Affirm Holdings, Inc. (NASDAQ:AFRM) shares have been powering on, with a gain of 26% in the last thirty days. The last month tops off a massive increase of 127% in the last year.

After such a large jump in price, you could be forgiven for thinking Affirm Holdings is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 7x, considering almost half the companies in the United States' Diversified Financial industry have P/S ratios below 2.7x. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Affirm Holdings

What Does Affirm Holdings' Recent Performance Look Like?

Affirm Holdings certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Want the full picture on analyst estimates for the company? Then our free report on Affirm Holdings will help you uncover what's on the horizon.

Is There Enough Revenue Growth Forecasted For Affirm Holdings?

The only time you'd be truly comfortable seeing a P/S as steep as Affirm Holdings' is when the company's growth is on track to outshine the industry decidedly.

Retrospectively, the last year delivered an exceptional 47% gain to the company's top line. The latest three year period has also seen an excellent 161% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 24% each year as estimated by the analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 8.8% per year, which is noticeably less attractive.

With this information, we can see why Affirm Holdings is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Affirm Holdings' P/S

Shares in Affirm Holdings have seen a strong upwards swing lately, which has really helped boost its P/S figure. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our look into Affirm Holdings shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Affirm Holdings that you need to be mindful of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.