Figs (FIGS)

Healthcare apparel company Figs (NYSE:FIGS) reported Q1 CY2025 results topping the market’s revenue expectations, with sales up 4.7% year on year to $124.9 million. Its GAAP profit of $0.01 per share was $0.01 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.

Thanks to social media and the internet, not only are styles changing more frequently today than in decades past but also consumers are shifting the way they buy their goods, favoring omnichannel and e-commerce experiences. Some apparel and accessories companies have made concerted efforts to adapt while those who are slower to move may fall behind.

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. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Figs grew its sales at an incredible 37.3% compounded annual growth rate. Its growth beat the average consumer discretionary company and shows its offerings resonate with customers.

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 significantly as its annualized revenue growth of 4.3% over the last two years was well below its five-year trend.

We can better understand the company’s revenue dynamics by analyzing its number of active customers, which reached 2.7 million in the latest quarter. Over the last two years, Figs’s active customers averaged 9.9% year-on-year growth. Because this number is higher than its revenue growth during the same period, we can see the company’s monetization has fallen.

This quarter, Figs reported modest year-on-year revenue growth of 4.7% but beat Wall Street’s estimates by 4.8%.

Looking ahead, sell-side analysts expect revenue to decline by 2.2% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and suggests its products and services will see some demand headwinds.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Figs’s operating margin has shrunk over the last 12 months and averaged 3% over the last two years. Although this result isn’t good, the company’s elite historical revenue growth suggests it ramped up investments to capture market share. We’ll keep a close eye to see if this strategy pays off.

This quarter, Figs’s breakeven margin was in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Figs’s full-year EPS dropped 259%, or 37.6% annually, over the last four years. We tend to steer our readers away from companies with falling revenue and EPS, where diminishing earnings could imply changing secular trends and preferences. Consumer Discretionary companies are particularly exposed to this, and if the tide turns unexpectedly, Figs’s low margin of safety could leave its stock price susceptible to large downswings.

In Q1, Figs reported EPS at $0.01, in line with 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 to perform poorly. Analysts forecast its full-year EPS of $0.02 will hit $0.07.

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 impressive cash profitability, giving it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 14.5% over the last two years, better than the broader consumer discretionary sector. The divergence from its underwhelming operating margin stems from the add-back of non-cash charges like depreciation and stock-based compensation. GAAP operating profit expenses these line items, but free cash flow does not.

Figs’s free cash flow clocked in at $7.93 million in Q1, equivalent to a 6.3% margin. The company’s cash profitability regressed as it was 3 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

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’s five-year average ROIC was negative 5.5%, meaning management lost money while trying to expand the business. Its returns were among the worst in the consumer discretionary sector.

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. Over the last few years, Figs’s ROIC has increased. This is a good sign, and we hope the company can continue improving.

Companies with more cash than debt have lower bankruptcy risk.

Figs is a profitable, well-capitalized company with $251.2 million of cash and no debt. This position is 31.6% 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.

The quarter itself was fine, with revenue and EBITDA beating. However, full-year EBITDA margin guidance missed and likely raises fears of tariff or macro impacts. The stock traded down 13.4% to $4.35 immediately after reporting.

Updated: May 15, 2025 at 10:51 PM EDT

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Figs.

Figs isn’t a terrible business, but it doesn’t pass our bar. Although its revenue growth was exceptional over the last five years, it’s expected to deteriorate over the next 12 months and its declining EPS over the last five years makes it a less attractive asset to the public markets. And while the company’s projected EPS for the next year implies the company’s fundamentals will improve, the downside is its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

Figs’s P/E ratio based on the next 12 months is 60.8x. This valuation tells us a lot of optimism is priced in - you can find better investment opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $4.56 on the company (compared to the current share price of $4.61).

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

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