Figs (NYSE: FIGS) stock rose nearly 18% in yesterday's session and is down 2% in pre-market trading. The rally came as Billionaire investor Ron Baron disclosed a substantial stake in the business.
What Is Figs?
FIGS, Inc. provides healthcare apparel and lifestyle brands. The company sells scrub tops, scrub pants, lab coats, underscrub, and outwear for both men and women. FIGS serves customers in the United States.
The American healthcare apparel brand is based in Santa Monica, California. The company was founded in 2013 by Heather Hasson and Trina Spear, who both serve as co-CEOs.
Figs will report its Q3 earnings on November 9, 2022. FactSet analysts project EPS of $0.02 and sales of $124.85m for the quarter.
FIGS Q2 Financial Results
Q2 Net Revenues: $122.2m (up 21% Y/Y)
Gross Margin: 70.6%
Adjusted EBITDA Margin: 17.6%
Net Income: $4.9m
Average Order Value: $109
Q2 net revenue per active customer: $227 (up 3.7% Y/Y)
Active Customers: 2 million
How Does Figs Make Money?
Figs makes money selling health care scrubs that come in various colors and styles, as well as several additional products for healthcare professionals. The company is focused on bringing innovative new products to market and connecting with customers to ensure it best meets their needs.
For instance, Figs intends to bring an extended size range out later this year, from 3XL to 6XL.
Trina Spear, CEO, Co-Founder & Director of FIGS, Inc, said:
We're focused on building a company over the long run, an iconic brand over the next 100 years. And the stock market is extremely volatile, and that's due to a ton of different macro issues that I'm sure you're hearing all over the new. So, that's not where we're focused.
We're focused on the fundamentals of our business and executing every day. And right now, the market isn't really reflecting the fundamentals of our business.
FIGS Stock Financials
FIGS stock has a price-to-earnings ratio (P/E) of 65. Its price-to-book-value (P/BV) is 7.1, which is well above the industry average of 1.2. FIGS stock does not come with a dividend yield.
Over the past year, Figs Inc (FIGS) has traded between $6.93 and $48.63. Today it trades at around $11.91.
Year-to-date, the FIGS stock is down by -55.56%, while the S&P 500 is down -12.46% over the same period.
FactSet analysts have a consensus Overweight rating on FIGS stock with a target share price of $13.85.
The frequency of customer shopping visits has moderated since peak-COVID-19 but growth is still apparent and impressive.
FIGS Stock Risks
The company faces a rise in marketing expenses and higher input costs for materials.
Companies that import goods from China face the added risk that geopolitical unrest could impact costs and supply chain efficiency.
Stock-based compensation costs are high. The company paid out $17.25m in stock-based compensation in the first half of 2022. However, this was less than the whopping $61m paid in the first six months of 2021, which was linked to the FIGS IPO in May 2021.
Meanwhile, the company is up against competitors selling copies of its designs but has obtained multiple design patents and considerable IP protection on all its products. The group also looks to take enforcement action against any company attempting to succeed by wrongfully copying what Figs has created.
Should You Invest in FIGS?
The seasonless, always-in-stock nature of Figs uniform products means it can stock up against supply chain issues without concern of the apparel going out of fashion. This has helped it successfully manage the supply chain crisis.
Figs expects full-year 2022 net revenues to be approximately $510m to $530m, representing growth of 22% to 26% compared to 2021.
The company has a strong fan base of health care professionals, and this is reflected in positive social media coverage across TikTok, Instagram and more.
The recent $100m investment by Baron Capital Management adds weight to the investment case and gives shareholders reassurance.
Investor Ron Baron told CNBC:
We’ve added $100 million in Figs, which you haven’t heard very much about, but you will soon. It’s the Lululemon of healthcare.
Whether you should invest in FIGS stock depends on your investing time horizon and belief in its ability to grow.