FIGS

We rate FIGS, Inc. (FIGS) as a Hold with a composite score of 61.3/100 at a current price of $10.95. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in momentum (79th percentile) and quality (68th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (37th percentile) and value (60th percentile) tempers our overall conviction. We assign a No Moat rating (39/100), Low uncertainty, and Poor capital allocation.

Key items to watch: quarterly earnings execution and sector-level competitive dynamics. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

FIGS, Inc. holds a top-quartile position (#0 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 61.3/100 places it at rank #574 in our full 7,333-stock universe. At $1.1B in market capitalization, FIGS, Inc. is a small-cap player in the Manufacturing space, which limits certain scale advantages but may allow for more agile strategic execution.

The outlook is moderately positive, with revenue expanding at 5% and favorable momentum (79th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.

The margin cascade tells an important story: gross margins of 68% (+25.4pp vs sector) narrow to operating margins of 2% (+0.3pp vs sector) and net margins of 2.3%, yielding a gross-to-net conversion rate of 3%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $10.95, FIGS, Inc. is trading near fair value based on current fundamentals. Our value factor score of 60/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 131.7x (a 492% premium to the sector median of 22.3x), EV/EBITDA of 172.6x (at a premium), P/B of 4.5x, P/S of 3.3x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a Low uncertainty rating to FIGS, Inc.. The company exhibits strong financial stability with a beta of 1.05, conservative leverage (32% D/E), and a stability factor in the 64th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: elevated valuation multiple (P/E 131.7x) that leaves limited margin for error. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 64th percentile and quality factor at the 68th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 68% provide a buffer against cost pressures; above-average stability (64th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate FIGS, Inc.'s capital allocation as Poor. Key concerns include low returns on equity (3.4%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — FIGS, Inc. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, FIGS, Inc. receives a Hold rating with a composite score of 61.3/100 (rank #574 of 7,333). Our quantitative framework assigns a No Moat (39/100, trend: stable), Low uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 61/100.

Our analysis supports a neutral stance on FIGS, Inc.. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.