Affirm (NASDAQ:AFRM), the premier “buy now, pay later” (BNPL) lender with various merchants and shopping portals, still isn’t profitable. Buying AFRM stock now is likely to make you pay later since the company is cascading its losses with higher revenue and loans.

But don’t tell that to recent investors in the stock. AFRM shares have skyrocketed since the end of July. For example, on July 30 it was at $56.32 and by Sept 21 it closed at $108.11. That represents a gain of 92% over the past month and a half.

The most likely reason is that on Aug. 27, Affirm announced a new partnership with Amazon (NASDAQ:AMZN) to offer a point-of-sale BNPL lending option for items $50 and higher.

Affirm’s Recent Earnings Release

Then on Sept. 9, Affirm released its fiscal Q4 earnings ending June 30. That is when investors figured out the company’s expected earnings are still going to be negative.

As a result, AFRM stock peaked and is now falling again. From its high of $123.70, it was down to $108.11 as of Sept. 21. I suspect it will continue dropping over the long run.

One reason for its decline is that despite higher revenue and higher levels of loan activity, the company continues to post higher losses. For example, revenue rose 70.8% to $870.5 million for the year ending June 30. But its operating losses also rose by 252% from $107.8 million to $379.1 million this year.

Additionally, as I have pointed out in the past, the company still does not indicate its net interest margin (NIM). Providing a NIM figure is common with almost every other lending company, as it allows investors to see if the spread between the cost of its borrowings and the interest earned from BNPL loans is wide enough. My assumption is that there is still a negative spread.

Moreover, Affirm does not charge late fees, annual fees or the other typical fees that most credit card lenders get away with. Therefore, there is no cushion for the potential NIM spread it is experiencing. Moreover, its allowance for credit losses grew by 23.8% to $117.76 million.

Luckily, Affirm does not hold on to the BNPL loans it generates. It sells them to structured vehicles and books a gain in revenue. This is how the company is in large part avoiding the NIM issue, as it does not hold on to most of the loans it generates.

Forecasts for AFRM Stock Don’t Bode Well

Affirm also recently provided guidance for this coming fiscal year ending June 30, 2022. On page three of its earnings release, it indicated that next year, the adjusted operating loss will be between $135 million and $145 million. In other words, Affirm expects more losses.

That is not going to excite investors in AFRM stock in the long run. They want to see a profitable operation, especially at the high level of revenue the company is at right now.

For example, TipRanks reports that 11 Wall Street analysts have written about AFRM stock in the last three months. They now have an average price target of just $114.18, or 5.6% over its Sept. 21 price. That is really nothing to write home about, and it is not going to make up for Affirm’s losses.

In addition, Yahoo! Finance, which uses Refinitiv analyst survey data, reports that 13 analysts have an average target price of just $109.31. That is barely 1.1% over yesterday’s price of $108.11.

What Should Investors Do With AFRM Stock?

It’s nice that the company can generate more revenue with Amazon and its huge existing cadre of merchants that offer a BNPL Affirm loan option. But unless the company can show when it will become profitable, the business model may not be worth much.

That is why I suggest investors wait for a bargain entry point into AFRM stock. For example, as of Sept. 21, its book value is $2.58 billion but its market cap is $29.39 billion. That means AFRM stock trades for 10 times its shareholders’ equity value. That is much too high a multiple. Once the company becomes profitable, if ever, then AFRM might be worth looking at for most value investors.

On the date of publication, Mark R. Hake did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. 

Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.