Figs (FIGS)

Healthcare apparel company Figs (NYSE:FIGS) reported Q4 CY2025 results beating Wall Street’s revenue expectations, with sales up 33% year on year to $201.9 million. Its GAAP profit of $0.10 per share was significantly above analysts’ consensus estimates.

Company Overview

Rising to fame via TikTok and founded in 2013 by Heather Hasson and Trina Spear, Figs (NYSE:FIGS) is a healthcare apparel company known for its stylish approach to medical attire and uniforms.

The Consumer Discretionary sector, by definition, is made up of companies selling non-essential goods and services. When economic conditions deteriorate or tastes shift, consumers can easily cut back or eliminate these purchases. For long-term investors with five-year holding periods, this creates a structural challenge: the sector is inherently hit-driven, with low switching costs and fickle customers. As a result, only a handful of companies can reliably grow demand and compound earnings over long periods, which is why our bar is high and High Quality ratings are rare.

Apparel and accessories companies design, brand, and distribute clothing, handbags, jewelry, and related lifestyle products, often spanning multiple price tiers. Tailwinds include premiumization trends (consumers trading up for perceived quality), international expansion into emerging markets, and growing digital commerce penetration. However, these businesses face headwinds from highly cyclical demand, intense promotional environments, and counterfeit competition undermining brand equity. Tariff volatility and sourcing concentration in a handful of countries add risk. Additionally, rapidly changing fashion cycles and the rise of ultra-fast-fashion digital competitors compress product life cycles and make demand forecasting exceptionally difficult.

Figs's primary competitors include Dickies Medical (owned by VF Corp NYSE:VFC) and private companies Cherokee Uniforms, Barco Uniforms, Scrubs & Beyond, and Medline Industries.

A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Figs grew its sales at a 19.1% annual rate. Though this growth is acceptable on an absolute basis, we need to see more than just topline growth for the consumer discretionary sector, which can display significant earnings volatility. This means our bar for the sector is particularly high, reflecting the non-essential and hit-driven nature of the products and services offered. Additionally, five-year CAGR starts around Covid, when revenue was depressed then rebounded.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Figs’s recent performance shows its demand has slowed as its annualized revenue growth of 7.5% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs.

We can better understand the company’s revenue dynamics by analyzing its number of active customers, which reached 2.92 million in the latest quarter. Over the last two years, Figs’s active customers averaged 5% year-on-year growth. Because this number is lower than its revenue growth during the same period, we can see the company’s monetization has risen.

This quarter, Figs reported wonderful year-on-year revenue growth of 33%, and its $201.9 million of revenue exceeded Wall Street’s estimates by 21.8%.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and suggests its products and services will see some demand headwinds.

Figs’s operating margin has been trending up over the last 12 months and averaged 3.4% over the last two years. The company’s higher efficiency is a breath of fresh air, but its suboptimal cost structure means it still sports inadequate profitability for a consumer discretionary business.

This quarter, Figs generated an operating margin profit margin of 9.3%, up 3.5 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Figs, its EPS declined by 18.3% annually over the last five years while its revenue grew by 19.1%. This tells us the company became less profitable on a per-share basis as it expanded.

In Q4, Figs reported EPS of $0.10, up from $0.01 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Figs’s full-year EPS of $0.19 to shrink by 39.3%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Figs has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 9.9%, lousy for a consumer discretionary business.

Figs’s free cash flow clocked in at $58.07 million in Q4, equivalent to a 28.8% margin. This result was good as its margin was 10.9 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, leading to temporary swings. Long-term trends are more important.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Figs historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 1.1%, lower than the typical cost of capital (how much it costs to raise money) for consumer discretionary companies.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Fortunately, Figs’s has increased over the last few years. This is a good sign, and we hope the company can continue improving.

One of the best ways to mitigate bankruptcy risk is to hold more cash than debt.

Figs is a profitable, well-capitalized company with $300.8 million of cash and $60 million of debt on its balance sheet. This $240.8 million net cash position is 13.4% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

It was good to see Figs beat analysts’ EPS expectations this quarter. We were also excited its EBITDA outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this quarter featured some important positives. The stock traded up 6.2% to $13.25 immediately following the results.

Updated: February 26, 2026 at 5:06 PM EST

Before deciding whether to buy Figs or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

We see the value of companies helping consumers, but in the case of Figs, we’re out. On top of that, Figs’s number of active customers has disappointed, and its declining EPS over the last five years makes it a less attractive asset to the public markets.

Figs’s P/E ratio based on the next 12 months is 100.6x. This multiple tells us a lot of good news is priced in - we think other companies feature superior fundamentals at the moment.

Wall Street analysts have a consensus one-year price target of $10.42 on the company (compared to the current share price of $13.25), implying they don’t see much short-term potential in Figs.