The Afterpay Touch Group Ltd (ASX: APT) share price finished 8.6% higher today, it was the top performer out of all of the shares in the ASX 200.
The buy now, pay later provider has been very volatile in recent weeks with rising interest rates, a senate inquiry and rapidly-growing sales all causing Afterpay's share price to resemble a rollercoaster.
Indeed, over the past week the Afterpay share price has grown by 21%. Yet, even with that rapid recovery, it is down nearly 40% since reporting season. If the US FAANG shares keep recovering then it's likely the Afterpay share price will keep going up.
The short-term lender industry is the focus of a senate inquiry which could have lasting effects on businesses like Cash Converters International Ltd (ASX: CCV) and Credit Corp Group Limited (ASX: CCP).
Will Afterpay be affected? Management think it shouldn't be because Afterpay doesn't charge interest or account & setup fees. Afterpay is free for customers if they pay on time.
Businesses that are displaying rapid growth and are fundamentally changing the retail industry are going to come under scrutiny from all sides – from bears, bulls and regulators.
Afterpay is growing very strongly. In FY18 its revenue and other income increased by 390% and underlying earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 468%.
The Afterpay platform had already seen A$115 million of underlying sales processed in the US to the end of October, which is less than six months after its launch there.
Afterpay will soon be launched in the UK too, a market that's over two times the size of the Australian population.
Foolish takeaway
Afterpay finished trading today at 98x FY20's estimated earnings. This is a very high price and I couldn't bring myself to invest at this level.
However, if it captures as much of a market share in the US and UK as it has in Australia then it might still be a very good investment for the long-term. But, I won't be making that bet at this price.
