Affirm Holdings, Inc. (NASDAQ:AFRM) is a leading financial technology company that offers innovative buy now, pay later (BNPL) services. It enables consumers to make purchases and spread the cost over time without incurring hidden fees. Affirm is in direct competition with other fintech entities such as Upstart Holdings, Inc. (UPST), SoFi Technologies, Inc. (SOFI), and traditional financial institutions.
Affirm's Return on Invested Capital (ROIC) is -3.09%, which is significantly lower than its Weighted Average Cost of Capital (WACC) of 16.38%. This negative ROIC indicates that Affirm is not generating sufficient returns to cover its cost of capital, posing a potential concern for investors. The ROIC to WACC ratio of -0.19 further underscores this inefficiency.
In comparison, Upstart Holdings has an even lower ROIC of -17.03% against a WACC of 12.10%, resulting in a ROIC to WACC ratio of -1.41. This suggests that Upstart is also facing challenges in generating returns that surpass its cost of capital. Similarly, SoFi Technologies has a ROIC of -0.17% and a WACC of 16.19%, with a ROIC to WACC ratio of -0.01, indicating slight underperformance.
Roblox Corporation and Snowflake Inc. also exhibit negative ROICs of -30.41% and -25.32%, respectively, with WACCs of 10.74% and 8.82%. Their ROIC to WACC ratios of -2.83 and -2.87 reflect significant inefficiencies in capital utilization. However, Robinhood Markets, Inc. stands out with a positive ROIC of 9.01% and a WACC of 12.43%, resulting in a ROIC to WACC ratio of 0.72
