Affirm is an undervalued stock and I am reiterating a Buy.

Affirm (AFRM) has outperformed expectations and guided higher since my initial recommendation, rewarding early investors.

It has a strong network effect of a growing customer base and an expanding merchant base feeding off each other.

It has excellent operating metrics, with gross volume, revenue, customers, and merchants growing over 30% in the past two years.

Its operating cash flow margin and revenue growth add up to 57, easily surpassing the rule of 40.

While this is not a GAAP earnings story yet, operating cash flow is huge, resulting in an estimated cash flow per share of about $3.74. With adjusted operating margins of 27% + revenue growth of 30%, equaling 57, it easily surpasses the rule of 40.

The valuation is very reasonable at 27X earnings, a small PEG ratio of just 0.3 for the current year and fluctuating between 0.7, and 0.5 for the next 3. It sells for just 7x earnings growing at 30% this year and at a CAGR of 24.5% for the next 3. The P/S growth ratio is also small at 0.22 and even better decreasing to 0.15. Clearly, the stock has a lot of room to grow.

Valuation aside, I would just buy it for its network effect alone. There are so many other positives of its wide and diverse reach and its stickiness and brand loyalty. Affirm has a lot of room to grow - BNPL is just about 1% to 1.5% of total credit card spending but is growing very fast at 20%. It does have a larger share of about 5-6% of global e-commerce payments and has a high adoption rate by younger customers. The trend remains their friend and growth has been considerably faster than I originally estimated. I'm reiterating a buy.

You can read the entire article at Seeking Alpha.