Affirm Holdings, Inc. (NASDAQ:AFRM) is a financial technology company that offers buy now, pay later (BNPL) services. It allows consumers to make purchases and pay for them over time with no hidden fees. Affirm competes with other fintech companies like Upstart Holdings, Inc. (UPST), SoFi Technologies, Inc. (SOFI), and traditional financial institutions.
In evaluating Affirm's financial performance, the Return on Invested Capital (ROIC) is a critical metric. Affirm's ROIC is -3.09%, which is significantly lower than its Weighted Average Cost of Capital (WACC) of 17.28%. This negative ROIC indicates that Affirm is not generating enough returns to cover its cost of capital, which is a concern for investors.
When comparing Affirm to its peers, Upstart Holdings has a ROIC of -20.60% and a WACC of 11.89%, resulting in a ROIC to WACC ratio of -1.73. SoFi Technologies, with a ROIC of -0.93% and a WACC of 12.46%, has a ratio of -0.07. Both companies, like Affirm, are not covering their cost of capital.
Roblox Corporation and Snowflake Inc. also show negative ROICs of -30.41% and -24.13%, respectively, with WACCs of 11.29% and 8.23%. Their ROIC to WACC ratios are -2.69 and -2.93, indicating inefficiencies in capital utilization.
Robinhood Markets, Inc. (HOOD) is the outlier among these companies, with a positive ROIC of 7.38% and a WACC of 12.40%, resulting in a ROIC to WACC ratio of 0.60. This suggests that Robinhood is effectively using its capital to generate returns that exceed its cost, setting it apart from its peers.
