Evaluating Figma’s Stock After a 7% Bounce and Ongoing Market Volatility

If you’re trying to figure out what to do with Figma stock right now, you are not alone. The company’s share price has been anything but boring these past few weeks. After rallying 7.0% in just the last seven days, Figma is still down a staggering 26.5% over the past month and sits 50.8% below where it started the year. These wild swings have caught the attention of traders and long-term investors alike, and many are wondering if these moves reflect a real change in Figma’s growth prospects or simply shifting market sentiment.

This recent volatility has not come out of nowhere. It lines up with broader developments in the tech sector as investors shift focus between risk and reward. While Figma continues to gain recognition for its collaborative design platform, market participants are taking a harder look at valuation, competition, and the potential for further growth.

On that note, Figma’s current valuation is something to pay attention to. According to the latest numbers, the company scored a 0 out of 6 on our undervaluation checks. That means Figma is not considered undervalued by any of the six key metrics analysts typically use. So, does that mean the opportunity has passed, or are there other factors in play that could change the picture?

Let’s break down what goes into these valuation checks and, more importantly, explore if there’s a smarter way to approach Figma’s price tag.

Figma scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Figma Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates what a company is worth by projecting its future cash flows and then discounting them back to today’s value. This approach helps investors understand whether the current share price makes sense relative to the company’s actual earning power over time.

According to the DCF analysis, Figma’s latest Free Cash Flow (FCF) is $294.3 Million. Analysts have made projections for the next five years, with FCF expected to reach $367.5 Million by the end of 2029. Beyond that, estimates are extrapolated based on industry trends and established growth rates, taking the ten-year outlook up to $638.7 Million by 2035. All cash flow figures are reported in US dollars.

Based on these projections and using a two-stage free cash flow to equity approach, the DCF model calculates Figma’s intrinsic fair value at $16.41 per share. However, the current share price is significantly higher. This means the stock is trading at a premium. The implied intrinsic discount is -246.1%, indicating Figma is dramatically overvalued according to this rigorous model.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Figma.

Our Discounted Cash Flow (DCF) analysis suggests Figma may be overvalued by 246.1%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Figma Price vs Sales (P/S Ratio)

For technology companies like Figma, which may not have consistent profitability but are growing revenues rapidly, the Price-to-Sales (P/S) ratio is often a go-to valuation metric. This is because it focuses on sales growth rather than earnings, making it particularly useful for companies still investing heavily in expansion or operating in fast-changing industries.

Growth expectations and risk levels play a major role in determining what a "fair" P/S ratio should be. Companies with higher projected growth or lower perceived risk often justify higher multiples, while slower-growing or riskier firms are usually valued at a discount to their peers.

Currently, Figma trades at a P/S ratio of 31.1x. This figure is dramatically higher than both the software industry average of 5.6x and the peer average of 10.2x. While this premium could reflect Figma's unique market position and ambitious growth targets, it does stand out as expensive on traditional benchmarks.

Simply Wall St’s "Fair Ratio" is designed to go a step further than these broad comparisons. Rather than just looking at averages, the Fair Ratio incorporates Figma’s actual revenue growth, margins, industry conditions, market capitalization, and specific company risks. This tailored approach gives a more nuanced view of whether the premium is justified or if the stock is running too hot.

Right now, Figma’s actual P/S is meaningfully above any likely Fair Ratio based on these facts. This suggests that, even accounting for its strengths, the stock looks overvalued on a relative sales basis.

Result: OVERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Figma Narrative

Earlier we mentioned that there’s an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is essentially the story behind your investment. It’s where you combine your personal perspective about Figma’s future with your estimates of key numbers like fair value, revenue, earnings, and profit margins.

Narratives transform the numbers by linking Figma’s business story to a clear financial forecast and then a target fair value, helping you cut through noise and see exactly how your viewpoint translates into an investment thesis. This tool is available right now on Simply Wall St’s Community page, where millions of investors explore, share, and refine their own Narratives in just a few clicks.

With Narratives, it’s easy to check whether today’s price looks like a bargain or a risk by comparing your Fair Value estimate against the current stock price. Plus, Narratives automatically update when big news or earnings are released, meaning your analysis is always relevant as the story unfolds.

For example, one investor might believe Figma’s cross-product integration and rapid enterprise adoption justify a $100 fair value, while another, wary of intensifying competition, sets theirs at $45. Narratives make these differing perspectives clear and actionable.

Do you think there's more to the story for Figma? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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