About Figs Incorporated
If you were fooled by this company’s name and were under the (ever so tragically false) impression that this was the company that manufactured and sold Fig Newtons, join the club.
While the topic of today’s stock analysis article isn’t going to be nearly as tasty, medical clothing and apparel company Figs will just have to do the trick.
Figs Incorporated is one of the few founder-led publicly traded companies out there (which we always love to see) that is engaged in a very, very niche line of business within the medical realm.
Figs is undoubtedly on a mission to make operating in the medical field both more comfortable and fashionable than ever.
As can be seen on the company’s website, Figs supplies custom-made shoes, scrubs, hats, supplemental medical equipment, vests, jackets and so much more for those who work in the medical field.
The company primarily operates a direct-to-consumer (DTC) business model where individuals can make purchases through its website and groups can also make purchases as well, including medical students.
Remember, the medical field itself is vast.
Wide and deep.
Yep, when we think about the medical field we instantly think of doctors and nurses, however, Figs’ total addressable market (TAM) undoubtedly includes dentists, lab assistants, veterinarians and many other specialists that are professional and certainly take heed of their appearance.
This is just about how Figs Incorporated makes its money; by selling medical apparel to as many as it possibly can.
Let’s see how financially healthy this relatively young company is and whether or not it is worth considering as an investment to buy and to hold, in sickness and in (hopefully) wealth.
Figs’ stock financials
Tucked in away at a share price of $8.08 with a market capitalization of $1.29 billion, a price-to-earnings (P/E) ratio of 105.21 and no annually distributed dividend, Figs Incorporated is a premium-priced stock that just might be worth paying for if the growth is there to back it up.
However, there has to be a significant amount of growth running through this company as it is commonly held that a price-to-earnings ratio of 20 indicates that a stock is trading at exactly fair value and anything higher implies that it’s overvalued, and by this measure, Figs’ stock (NYSE: FIGS) is trading well above that of fair value.
But again, if there’s some growth, there’s a way.
As it relates to the overall health of the company’s balance sheet, Figs’ executives are in charge of around $395 million in terms of total assets as well as approximately $87.3 million in terms of total liabilities.
Well done, founders and other leaders of Figs Incorporated.
Well done.
Namely, although seemingly a growth company, the managers of Figs have been able to keep the aggregate amount of its liabilities well below that of its total assets and in this current frothy market environment, that’s saying something.
Onto the company’s income statement, Figs’ total annual revenues since 2019 have grown at a solid rate, pegged at $110 million in 2019, $263 million in 2020, $420 million in 2021, up to its latest reported figure (displayed on TD Ameritrade’s platform) of $506 million, as reported in 2022.
We don’t really think there’s much to say regarding this year-over-year (YOY) growth in revenue, as we had initially hoped and plainly expected that a company founded in 2013 would’ve been able to penetrate more users and more markets and increase its revenues year after year, which Figs Incorporated has simply done.
To us, this is good but it is also certainly expected.
As it pertains to the company’s cash flow situation, Figs Incorporated experienced negative net income (since 2019) only as reported in 2021, which from our perspective can perhaps be attributed to this company reinvesting heavily during this time given the progression of COVID-19 and the subsequent need for more on-staff healthcare professionals and thus, the abruptly heightened demand for fresh uniforms and other comfortable, fashion-friendly articles of clothing along with other supplements.
If this was the case, we have no issue with Figs bleeding cash during this year as it will probably strengthen their supply chain capabilities and overall manufacturing capabilities in the long run.
Investments now, results later.
Figs’ stock fundamentals
One of the best things about this company’s core business model is the fact that it doesn’t have a middleman.
As previously stated, Figs runs a direct-to-consumer business model and thus takes care of all of the product distribution in-house.
One of the usual perks of this is a better trailing twelve month (TTM) net profit margin since Figs doesn’t have to give an outside distributor a considerable cut of its profits.
Let’s see how much this has helped Figs Incorporated.
According to TD Ameritrade’s platform, the company’s TTM net profit margin is 4.19% to the industry’s average of -0.45%.
It apparently pays to not have a middleman sometimes, as evidenced by Figs’ TTM net profit margin.
While it isn’t astronomically high by any means, it is also to be expected for a young, specialty apparel company managing its own distribution and tending to other costs such as one of retail’s weightiest; inventory.
At any rate, Figs Incorporated’s TTM net profit margin and its stature relative to the industry’s average is impressive in its own right and we’re happy to find that this company has been able to get this business in an annualized, net profitable state.
Regarding its TTM returns on assets and investment(s), Figs’ are both slightly higher than the industry’s averages on these fronts as well.
For instance, the company’s TTM return on its assets is, according to TD Ameritrade’s platform, 5.99% to the industry’s average of 5.4%.
Should you buy Figs stock?
This company has hit its niche on the head and then some.
It operates in a great sector with likely more and more recession resistant demand that will probably follow as a result of, unfortunately, more and more health afflictions and crises facing the United States and the globe and thus demand for more folks in uniforms, along with a younger workforce entering different areas of the medical field who take great pride in how they feel (comfort) and how they look (fashion) while at work.
Figs Incorporated serves a gigantic total addressable market that, from our perspective, it has hardly yet tapped.
Given that this is the case tied with the fact that this company’s TTM net profit margin and its TTM returns on assets and investment(s) are as solid as can be, its balance sheet is in a great position and its share price has come down around 77% (at the time of this writing) since its initial public offering (IPO), we think, in the long run, it’ll be worth paying a short-term premium (on a price-to-earnings basis) for shares of this company’s stock (NYSE: FIGS).
We give Figs Incorporated’s stock a “buy” rating.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.