FIGS is a high growth profitable stock that has a bright future
ahead here's everything you need to know in a few minutes
figs is a recently ipo'd company that's valued at $4.1 today and it trades under this ticker symbol
FIGS the company's mission is to celebrate empower and serve those who serve others the company is
primarily focused on the healthcare industry and specifically it makes high-quality scrubs that you
can't get anywhere else it has also started to move into other accessories for the healthcare
industry and has plans to enter new verticals as well what impressed us about this business is that
almost all of its sales are direct to consumer that means that end consumers go to the company's
website or use the company's mobile app to place orders and that drives 98% of this company's sales
and because this company is mostly focused on health care workers that is a relatively recession
resistant industry now what we're waiting to see is recurring revenue it's too early
to tell but what we want to see is that healthcare workers keep coming back to figs to buy new scrubs
over time company has spent time developing a proprietary cloth that is used in its scrubs and
it claims that it is the best quality cloth that you can buy that gives it a low cost advantage
in theory for that particular style however we're not convinced that that is a big advantage for
this company even though it does call that out on the other hand talk to any health care worker and
they will tell you that the figs brand is very strong so we give them full credit for that and
it's also worth mentioning that the company has some counter positioning advantages most scrubs
are sold through third-party vendors by going direct to consumer fix has a counter positioning
advantage this company is rapidly adding new customers to its platform and it's doing so
fairly inexpensively that makes us believe that this company's moat is rapidly expanding sales
growth has been quite impressive nearly doubling every year over the past three years and it has a
72% gross margin very impressive for a clothing company while the company is not yet
technically profitable on a gaap basis it is profitable when you look at free cash flow
and the company's balance sheet is absolutely pristine financially figs is in great shape
figgs was founded by a pair of women heather hassan and trina spear who are still on board
as ceos they get solid reviews from employees on glassdoor.com and they own a sizeable chunk 12%
of the company the biggest bold case for investors is the company's embedded optionality while it's
initially focused on healthcare workers the company has announced plans to expand its
brand into other verticals such as hospitality and food services now right now by focusing on
just healthcare workers the company is going after an estimated $12 billion market of which they've
captured about three percent but we expect that pi to grow over time as they move outside of health
care and as the operating leverage kicks in the profitability growth could be quite quick fig
stock hasn't done much for investors since it came public that's not surprising given that this is a
highly valued company and growth stocks have been under a lot of pressure but if you're just looking
at how the company is doing versus expectations so far so good unsurprisingly because it's a growth
company it is not focused on returning anything to shareholders at this time via buybacks or dividend
one key risk for investors to keep an eye on is the competition well figgs has established
itself as the brand leader in an unbranded market its products are more expensive than the generic
versions that means that competition is a key risk for investors to watch indefinitely and we
need to point out that the stock is richly valued currently it trades for 11 times sales and over 85
times free cash flow which is quite expensive for a clothing manufacturer however overall both of
us think that the risks of this company from a business perspective are actually pretty low so
how can investors win first investors should keep their eye on customer growth we want to see the
figs brand name continue to win over healthcare workers and the sales to grow second we want to
listen for management's comments about customers coming back and making repeat orders they talked
about this in their prospectus and we want to see customers continue coming back to figs third
as we said before the biggest bull case for this company is expanding into new industry verticals
food services and hospitality are two near-term opportunities and if the company's brand name
can successfully enter those markets the sky is the limit for this business so how did fig score
on our investing checklists the answer is pretty good on my checklist this company already got a 73
that number could go meaningfully higher over time if its stock starts to beat the market and if it
continues to exceed wall street's estimates and a score of a 10 on my framework was very high for a
clothing manufacturer in fact when we finished our hour-long deep dive into figs i pointed out that
this is pretty much the highest score a company like this could get so i was impressed overall
both of us think that figs is a very impressive business and if the company can continue to grow
rapidly we could see it being a market beating stock from here what did you think of this new
format please let us know in the comment section below if this video was helpful brian's out