It's not a secret that every investor will make bad investments, from time to time. But serious investors should think long and hard about avoiding extreme losses. It must have been painful to be aAffirm Holdings, Inc.(NASDAQ:AFRM) shareholder over the last year, since the stock price plummeted 76% in that time. A loss like this is a stark reminder that portfolio diversification is important. Because Affirm Holdings hasn't been listed for many years, the market is still learning about how the business performs. The last week also saw the share price slip down another 19%. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers inour company report.
If the past week is anything to go by, investor sentiment for Affirm Holdings isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
Before we look at the performance, you might like to know that our analysis indicates thatAFRM is potentially overvalued!
Affirm Holdings isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Affirm Holdings grew its revenue by 55% over the last year. That's well above most other pre-profit companies. So the hefty 76% share price crash makes us think the company has somehow offended market participants. There's clearly something unusual going on here such as an acquisition that hasn't delivered expected profits. What is clear is that the market is not judging the company on its revenue growth right now. Of course, markets do over-react so share price drop may be too harsh.
NasdaqGS:AFRM Earnings and Revenue Growth August 30th 2022
Affirm Holdings is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out thisfreereport showing consensus forecasts
A Different Perspective
Affirm Holdings shareholders are down 76% for the year, even worse than the market loss of 15%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. With the stock down 16% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. It's always interesting to track share price performance over the longer term. But to understand Affirm Holdings better, we need to consider many other factors.
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