Figma (FIG): Evaluating Valuation After Sharp Decline in 2024 Share Price

Figma (FIG) shares have been in focus lately as investors reassess the company's recent performance within the broader software sector. The conversation centers on how Figma's fundamentals are shaping up as the company continues to evolve following its IPO.

See our latest analysis for Figma.

Figma’s share price has lost significant ground this year, with a year-to-date share price return of -53.8%. While momentum has faded in recent weeks, the company’s fundamentals are still being actively reassessed by investors who are looking for renewed signs of growth potential.

If Figma’s story has you looking for more standout names in the space, take the next step and discover See the full list for free.

With shares trading well below analyst targets and revenue still growing annually, is Figma currently undervalued and primed for a turnaround? Or is the market already accounting for all future growth in its price?

Most Popular Narrative: 18.8% Undervalued

With Figma trading at $53.36 and the most widely followed narrative assigning a fair value around $65.70, the story diverges from recent price weakness. This narrative sees significant embedded potential beyond current sentiment and sets out its case in concrete operational and financial levers.

*“The ecosystem effect snowballs. Once a company adopts multiple Figma products, leaving becomes too disruptive. Enterprise adoption deepens, brand recognition extends beyond designers, and the company starts to influence the broader creative software market the way Adobe did in the 2000s.”*

Read the complete narrative.

What is the real engine under this optimistic price tag? The narrative’s fair value estimate hinges on Figma achieving strong, sustained margins and landing a rich future profit multiple, with revenue growth and platform-stickiness playing starring roles. The wild card is how quickly its new products and integrations actually transform user behavior and enterprise budgets. The numbers behind the forecast may surprise you.

Result: Fair Value of $65.70 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, slowing growth or strong competitor moves in AI could quickly challenge the case for Figma’s premium, especially if there is a shift in market sentiment.

Find out about the key risks to this Figma narrative.

Another View: Multiples Paint a Different Picture

While one narrative sees Figma as undervalued, our multiples analysis raises a red flag. The company's price-to-sales ratio stands at 29.3x, far above both the US Software industry average of 5.3x and the peer average of 9.9x. This significant gap suggests investors are already paying a premium. This dynamic can amplify downside risk if growth stumbles. If the market re-rates to these lower multiples, could today’s price actually be less of a bargain than it appears?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Figma Narrative

If you'd rather draw your own conclusions or prefer an independent approach, you can analyze the figures and construct a narrative in just a few minutes with Do it your way.

A great starting point for your Figma research is our analysis highlighting 2 key rewards and 4 important warning signs that could impact your investment decision.

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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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