FIGS, Inc.: Might Gain Share In Post-Tariff U.S., But Stock Still Super High

FIGS, Inc. reported modest U.S. growth in 1Q25, offset by decelerating international expansion and increasing competition. While management aims to offset tariff impacts through cost efficiencies, margin pressure persists, leading to lowered guidance. The analyst maintains a Hold rating due to an unattractive valuation of 56x EV/NOPAT given low growth and margins.

Analysis

FIGS, Inc. (FIGS) reported modest U.S. revenue growth in its first quarter of fiscal year 2025, however, inconsistent quarterly performance trends make it premature to confirm a sustained domestic recovery. International sales, while still a growth contributor, are showing decelerating expansion and will face more challenging year-over-year comparisons as the business scales. Management's articulated strategy to absorb tariff impacts through operational cost efficiencies is a sound approach, yet margin pressures persist, contributing to a downward revision of the company's financial guidance. The stock's valuation remains a significant concern, trading at a high 56x Enterprise Value to Net Operating Profit After Tax (EV/NOPAT) multiple, which appears unattractive considering the company's current low growth rates and margin profile, leading the analyst to maintain a Hold rating.

Key Decisions for Investors

• Investors should critically assess the 56x EV/NOPAT valuation in light of the lowered guidance, low growth, and persistent margin pressures before initiating or adding to positions.
• Monitor upcoming quarterly reports for evidence of sustained U.S. market recovery and a stabilization or re-acceleration in international sales growth, as these are key to justifying the current valuation.
• Closely track management's execution on cost efficiencies to mitigate tariff impacts and observe whether these efforts translate into improved profit margins in subsequent periods.