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Investing in stocks comes with the risk that the share price will fall. Anyone who held Affirm Holdings, Inc. (NASDAQ:AFRM) over the last year knows what a loser feels like. To wit the share price is down 70% in that time. Affirm Holdings may have better days ahead, of course; we've only looked at a one year period. Shareholders have had an even rougher run lately, with the share price down 56% in the last 90 days.
On a more encouraging note the company has added US$433m to its market cap in just the last 7 days, so let's see if we can determine what's driven the one-year loss for shareholders.
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. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last twelve months, Affirm Holdings increased its revenue by 64%. That's a strong result which is better than most other loss making companies. In contrast the share price is down 70% over twelve months. Yes, the market can be a fickle mistress. Typically a growth stock like this will be volatile, with some shareholders concerned about the red ink on the bottom line (that is, the losses). We'd definitely consider it a positive if the company is trending towards profitability. If you can see that happening, then perhaps consider adding this stock to your watchlist.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Affirm Holdings is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
Affirm Holdings shareholders are down 70% for the year, even worse than the market loss of 19%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. With the stock down 56% 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Affirm Holdings , and understanding them should be part of your investment process.
But note: Affirm Holdings may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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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.