Figma (FIG): Evaluating Valuation After Sharp Stock Drop and Ongoing Profit Concerns

Figma (NYSE:FIG) is making waves again, as a sharp 17% drop today has put the stock front and center for many investors tracking the software sector. While there is no single event driving this move, the plunge has sparked renewed conversations around whether Figma’s growth story is hitting a speed bump or simply pausing for breath. Times like these can prompt market reactions that signal an important turning point, or just another chapter in a volatile market cycle.

Looking back, Figma’s stock has underperformed so far this year, shedding 37%. Despite its healthy annual revenue growth of 26%, profit remains elusive, which could be fueling some investor caution. Recent weeks have been challenging as well, with consistent declines over the last month and past week, even as many growth tech peers found a firmer footing. Larger market sentiment around unprofitable tech appears to be having a greater impact than excitement over Figma’s platform growth, serving as a reminder that valuation still matters in fast-moving markets.

With the stock now sitting well below recent highs and the growth-versus-profit debate heating up, investors need to consider whether this slide points to a bargain opportunity or if the market has already priced in Figma’s future growth.

Price-to-Sales of 43.2x: Is it justified?

Based on the price-to-sales ratio, Figma trades at 43.2 times its revenue, which is significantly higher than both its peer group at 13.6x and the US software industry average of 5x. This level suggests the market is pricing in substantial future growth beyond current fundamentals.

The price-to-sales multiple measures how much investors are willing to pay for each dollar of a company’s revenue. This metric is particularly relevant in this case because Figma is not profitable yet, so other comparison metrics such as earnings-based multiples are not meaningful.

With Figma’s ratio so far above its peers, the implication is that the market is expecting exceptional revenue growth or other positive developments that may not be reflected in the current numbers. However, such a premium can also signal that the equity is vulnerable to sharp corrections if those expectations are not met.

Result: Fair Value of $3.91 (OVERVALUED)

See our latest analysis for Figma.

However, Figma’s persistent unprofitability and its lofty valuation may expose the stock to further corrections if revenue growth slows or if sentiment shifts.

Find out about the key risks to this Figma narrative.

Another View: SWS DCF Model Offers a Stark Contrast

While the market’s pricing leans toward optimism, our DCF model presents a very different picture, suggesting Figma is priced well above its estimated fair value. Can this gap close, or does risk remain elevated?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Figma for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Figma Narrative

If you see things differently or want to explore the numbers firsthand, you can quickly develop your own perspective on Figma’s outlook. This process takes less than three minutes—just 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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