The fancy way to describe Figs Inc. (FIGS) is as a direct-to-consumer health-care apparel business. Or, you could just say that people buy scrubs, lab coats, and similar products directly from the wearfigs.com digital platform.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
If you visit the website, you’ll see that Figs doesn’t offer run-of-the-mill scrubs. Indeed, these are “fashion scrubs” – stylish, chic, and a little sassy, yet still professional-looking.
That’s all fine and good, but is this a profitable business venture? This is a legitimate question, as health-care workers can buy scrubs and other work-wear from other outlets.
No worries – today we’ll put on our lab coats and delve into the still-fresh Figs IPO. To that end, we’ll start with a checkup of FIGS stock’s recent price action. (See Figs stock charts on TipRanks)
A Quick Look at FIGS Stock
If you needed proof that IPO mania is in full effect in 2021, look no further.
Prior to its public offering, Figs set its shares’ price range between $16 and $19. That didn’t last forever, as the company hiked its IPO price to $22 per share on May 26. FIGS stock debuted for public trading the next day, and you can probably guess what happened next.
If you guessed that the stock immediately shot up like a rocket, then you’re right. At one point, FIGS stock was up 30.4% from its IPO price, trading at $28.70.
The bullish momentum continued into June, with FIGS stock touching a high of $50.40. The share price did ease back a bit in early July, though, settling into the $44 area.
A Loyal Community
If you already rode FIGS stock into the $40’s and $50’s, congratulations. You probably earned a decent profit – but there’s still the question of whether to hold on for more potential gains.
To help answer that question, we need to look at the data. As it turns out, the data indicates that Figs has a loyal customer base, which the company describes as a “community.” That’s probably an apt description, as Figs had a whopping 1.5 million active customers as of March 31.
Moreover, from January 1, 2021 to March 31, 2021, Figs had a Net Promoter Score (NPS) of +81. The Net Promoter Score measures customers’ willingness to recommend a company’s products or services to others, and ranges from -100 to 100. Thus, the NPS of +81 suggests that Figs’ customers are satisfied overall and are generally loyal to the brand.
We can’t pretend that Figs’ scrubs are the cheapest ones available. Nevertheless, it appears that the company’s customers are willing to pay extra for attire that allows them to express their personalities in a professional manner.
Compelling Growth Story
Another question to ask is: does Figs’ customer loyalty translate into strong financials?
Let us allow the numbers to do the talking. For the year ending on December 31, 2020, Figs reported astounding year-over-year revenue growth, to the tune of 138.1%. During that same period, the company also recorded $263.1 million in net revenues, along with 26.3% in adjusted EBITDA margin.
Also during that time span – and circling back to customer loyalty – Figs reported that 62% of the company’s net revenues came from repeat customers. On top of all that, Figs vastly improved its cash flow from operations, from $6.5 million in 2019 to $21.7 million in 2020.
At the very least, we can say that KeyBanc analyst Edward Yruma is impressed with Figs’ strong growth rate and wide EBITDA margins. With those contributing factors in mind, Yruma unapologetically called Figs “one of the most compelling growth stories in our coverage.”
Wall Street Weighs In
According to TipRanks’ analyst rating consensus, FIGS is a Strong Buy, based on 8 Buy and 2 Hold ratings. The average Figs price target is $41, implying 6.9% downside potential.
The Takeaway
With its recent IPO, Figs fell from the tree and provided adventurous investors with a compelling work-attire-niche opportunity.
Sure, the FIGS stock price isn’t as low as it once was. With a surprisingly loyal community of repeat customers, however, there’s likely still room for the company and stock to grow.
Disclosure: At the time of publication, David Moadel did not have a position in any of the securities mentioned in this article.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.