Is Affirm Still Attractive After Its 460% Surge Amid Shifting BNPL Sentiment?

• Wondering if Affirm Holdings is still a smart way to play the buy now, pay later trend, or if most of the upside is already baked into the price? We are going to unpack what the current share price really implies.
• Despite being up 460.1% over the last 3 years, the stock has been choppy lately. It has slipped 2.6% over the past week and 6.8% over the last month, while still sitting 7.2% higher year to date even after a 5.3% drop over the past year.
• Recent moves have been driven largely by shifting sentiment around BNPL regulation, evolving partnerships with major merchants, and the broader debate about how sustainable consumer financing demand will be as interest rates and credit trends change. At the same time, changes in fintech valuations across the sector have pulled Affirm along for the ride, making it harder to tell how much of today’s price is company specific versus just part of a wider rerating.
• Right now, Affirm scores 0/6 on our valuation checks for being undervalued, which you can see in detail via our valuation score. In this article we will walk through what different valuation methods say about the stock and then finish with a more intuitive way to think about what the market is really pricing in.

Affirm Holdings scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Affirm Holdings Excess Returns Analysis

The Excess Returns model looks at how much profit a company can generate above the return that investors require on its equity, then capitalizes those excess profits into an estimate of fair value per share.

For Affirm, the starting point is a Book Value of $10.00 per share and a Stable EPS of $1.96 per share, based on weighted future return on equity estimates from 7 analysts. With an Average Return on Equity of 14.26% and a Cost of Equity of $1.10 per share, the model calculates an Excess Return of $0.86 per share. In other words, each dollar of equity is expected to earn more than investors strictly require, which supports a Stable Book Value of $13.72 per share, guided by forecasts from 3 analysts.

Rolling these assumptions forward, the Excess Returns valuation implies an intrinsic value of about $31.68 per share. Compared with the current market price, this indicates the stock is roughly 111.5% overvalued. In this framework, the market price stands well above the level suggested by these modeled returns.

Result: OVERVALUED

Our Excess Returns analysis suggests Affirm Holdings may be overvalued by 111.5%. Discover 935 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Affirm Holdings.

Approach 2: Affirm Holdings Price vs Earnings

For a company that is generating positive earnings, the price to earnings ratio is often the cleanest way to gauge how much investors are willing to pay for each dollar of profit. It captures both what the business is earning today and what the market expects those earnings to do in the future, while also reflecting the perceived risk around those expectations.

In practice, faster growing and less risky companies tend to justify higher PE multiples, while slower or more volatile businesses usually warrant lower ones. Affirm currently trades on a PE of about 94.9x, which is far richer than both the Diversified Financial industry average of around 14x and the broader peer group average near 28.3x. That headline comparison suggests the market is pricing in very strong growth and accepting a lot of execution risk.

Simply Wall St addresses this by estimating a Fair Ratio, which is the PE multiple that would be reasonable for Affirm given its specific earnings growth outlook, industry, profit margins, market cap and risk profile. This more tailored metric, at 30.7x, is more informative than a simple peer or sector comparison because it adjusts for the company’s unique characteristics rather than assuming one size fits all. Comparing this Fair Ratio with the actual 94.9x multiple points to Affirm being clearly overvalued on a PE basis.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1441 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Affirm Holdings Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which are simply the stories investors tell about a company that connect what they believe about its products, competition and execution to specific forecasts for future revenue, earnings and margins, and ultimately to a Fair Value they can compare with today’s price. On Simply Wall St’s Community page, millions of investors use Narratives as an easy, guided tool to turn their view of a business into a full financial model, then quickly see whether their Fair Value says the stock is a buy, a hold, or a sell at the current market price, and those Narratives are continually updated as new information like earnings, guidance or major news is released. With Affirm, for example, a more optimistic Narrative might assume revenue grows around the mid 20 percent range annually, margins expand toward the mid teens and a future PE in the low 40s is justified, supporting a Fair Value near $93, while a more cautious Narrative could build in slower top line growth, thinner margins and a lower exit multiple, leading to a Fair Value closer to $64 and a very different buy or sell conclusion.

Do you think there's more to the story for Affirm Holdings? Head over to our Community to see what others are saying!

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.

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