FIGS: High Market Expectations May Limit Upside As Momentum Slows

Key Takeaways

• Expanding international presence and ongoing innovation are diversifying revenue and strengthening customer loyalty beyond the core U.S. market.
  
• Enhanced cost discipline and a digital-first approach are boosting margins, offsetting external headwinds, and positioning the company for sustained earnings growth.
  
• Rising tariff costs, lower promotional activity, and intensifying competition threaten FIGS' growth, margins, and premium positioning amid expanding inventory and ongoing macroeconomic risks.

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.

• Persistent and accelerating growth in healthcare employment, along with a gradual normalization of purchasing behavior post-COVID, is increasing the core customer base and supporting a sustained rise in repeat and new customer revenue.
  
• Ongoing adoption of e-commerce and direct-to-consumer models is driving higher margins and improved customer retention, as evidenced by growing AOV, strong engagement on baseline (non-promo) days, and the successful expansion of omnichannel community hubs that fuel incremental revenue.
  
• Strategic international expansion, with recent launches in Japan, South Korea, and twelve new Latin American markets, is poised to diversify revenues and accelerate top-line growth beyond the U.S. core over the next several years.
  
• Enhanced product innovation-including new fits, fabrications, limited edition/seasonal launches, and deeper lifestyle category offerings-is increasing AOV and customer engagement, setting the stage for higher gross margins and expanded customer lifetime value.
  
• Disciplined cost management, logistics optimization, and targeted SG&A savings are quickly restoring EBITDA margin levels, helping to offset tariff headwinds and positioning earnings to accelerate as revenue growth compounds.

FIGS Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming FIGS's revenue will grow by 4.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 1.3% today to 5.6% in 3 years time.
• Analysts expect earnings to reach $37.0 million (and earnings per share of $0.23) by about September 2028, up from $7.2 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 32.0x on those 2028 earnings, down from 151.2x today. This future PE is greater than the current PE for the US Luxury industry at 19.8x.
• 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 8.43%, as per the Simply Wall St company report.

FIGS Future Earnings Per Share Growth

Risks

• FIGS faces ongoing and increasing tariff headwinds, particularly as most of its cost of goods sold is subject to tariffs in Vietnam, Jordan, and China, which could put sustained pressure on gross margins and profitability into 2026 and beyond.
  
• The company's growth outlook is tempered by a deliberate reduction in promotional activity, likely leading to slower customer acquisition and softer active customer growth, risking top-line revenue deceleration if baseline demand does not fully offset lost promotional-driven sales.
  
• Intensifying competition and the risk of commoditization in medical apparel could erode FIGS' premium positioning and pricing power, especially as non-scrubwear and lifestyle product categories showed signs of softness and limited launches, potentially pressuring revenue growth and market share over the long term.
  
• FIGS' planned inventory growth and investments in international expansion and new business lines increase execution risk-misjudging demand, overexpansion, or localized missteps could result in excess inventory, increased markdowns, and impaired net margins or earnings.
  
• The company's dependence on healthcare employment and spending-while currently robust-remains exposed to broader secular risks, such as cost-cutting at institutions or shifts to lower-cost alternatives, which could limit FIGS' ability to maintain revenue and profitability growth if the macro backdrop weakens over time.

Valuation

• The analysts have a consensus price target of $6.421 for FIGS based on their expectations of its future earnings growth, profit margins and other risk factors. 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 analyst's consensus, you'd need to believe that by 2028, revenues will be $656.8 million, earnings will come to $37.0 million, and it would be trading on a PE ratio of 32.0x, assuming you use a discount rate of 8.4%.
• Given the current share price of $6.65, the analyst price target of $6.42 is 3.6% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• 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.