Asia Expansion And Rising Healthcare Workforce Will Drive Demand

Key Takeaways

• Rapid international expansion, omnichannel strategies, and strong healthcare brand affinity position FIGS for outsized growth in both customer base and recurring revenues.
  
• Optimized logistics, sustainable cost reductions, and institutional sales expansion support durable margin improvement and above-expectation earnings potential.
  
• Heavy reliance on healthcare professionals, rising costs, lack of innovation, intensifying competition, and weak sustainability positioning threaten long-term growth and market relevance.

Catalysts

Together with its subsidiary, FIGS Canada, Inc., operates as a direct-to-consumer healthcare apparel and lifestyle company in the United States and internationally.

• Analysts broadly agree that international expansion in Asia and other regions will support growth, but this likely understates the potential: early wins in Japan and Latin America, the company's technology-enabled regional model, and the targeting of rapidly growing healthcare markets could drive a step change in international revenues and customer acquisition, significantly increasing total addressable market and long-term revenue growth rates.
  
• The consensus expects improved net margins and engagement via community hubs and omnichannel strategies; however, with nearly 40% of hub traffic from new customers and rapid omnichannel migration post-visit, the store rollout could rapidly accelerate FIGS' customer base and average order value in urban markets, leading to an outsized impact on both revenue and margin leverage well above current expectations.
  
• FIGS' deep brand affinity with healthcare professionals-demonstrated by record engagement during major campaigns and policy advocacy-positions it to capture an outsized share of long-term, recurring uniform purchases as the healthcare workforce expands, which should drive above-industry growth in both active customers and repeat revenues.
  
• The growing shift among healthcare organizations and institutions toward quality, brand-transparent apparel creates an opening for FIGS to expand its 'Teams' and institutional sales business globally-an underappreciated growth channel that could drive large-scale, high-margin contracts, accelerating earnings and supporting durable net margin expansion.
  
• FIGS' success in optimizing its logistics footprint, driving sustainable fulfillment and shipping cost reductions ahead of plan, and ongoing SG&A rationalization provide operating leverage that is not yet fully reflected in earnings estimates, creating room for further net margin upside even if tariffs persist, and improving free cash flow outlook.

FIGS Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on FIGS compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming FIGS's revenue will grow by 5.5% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 1.3% today to 5.7% in 3 years time.
• The bullish analysts expect earnings to reach $38.4 million (and earnings per share of $0.24) by about August 2028, up from $7.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 38.5x on those 2028 earnings, down from 161.4x today. This future PE is greater than the current PE for the US Luxury industry at 19.9x.
• Analysts expect the number of shares outstanding to decline by 3.85% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.44%, as per the Simply Wall St company report.

FIGS Future Earnings Per Share Growth

Risks

• FIGS' overreliance on healthcare professionals as its primary customer segment exposes the business to risk if penetration within this niche plateaus or if demand among medical workers weakens, which would limit revenue growth over the long term.
  
• Intensifying pricing and margin pressure from tariffs and a need to avoid broad price increases due to affordability concerns for customers could constrain FIGS' net margins, especially as tariffs on key sourcing countries like Vietnam and Jordan are set to increase and a significant portion of cost of goods sold is subject to these pressures.
  
• Growing competition from larger apparel and athletic brands entering the healthcare workwear space may erode FIGS' market share, resulting in slower revenue growth and potentially higher sales and marketing expenses as the company tries to defend its customer base.
  
• Slowing product innovation, evidenced by a recent decrease in non-scrubwear launches and a core focus that could limit newness, raises the risk of brand fatigue among customers, which could impact repeat purchase rates and long-term earnings growth.
  
• FIGS faces risk from consumer trends prioritizing sustainability and ethical production, and if it is not perceived as a leader in this area, consumer backlash and preference for more sustainable brands may dampen demand and reduce both revenue and brand equity over time.

Valuation

• The assumed bullish price target for FIGS is $8.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of FIGS's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $8.0, and the most bearish reporting a price target of just $5.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $669.4 million, earnings will come to $38.4 million, and it would be trading on a PE ratio of 38.5x, assuming you use a discount rate of 8.4%.
• Given the current share price of $7.1, the bullish analyst price target of $8.0 is 11.3% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.