Since January 2026, Figs has been in a holding pattern, posting a small loss of 0.5% while floating around $10.75. The stock also fell short of the S&P 500’s 7.1% gain during that period.
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Why Do We Think Figs Will Underperform?
We don’t have much confidence in Figs. Here are three reasons you should be careful with FIGS, plus one stock we’d rather own.
1. Weak Growth in Active Customers Points to Soft Demand
Revenue growth can be broken down into changes in price and volume (for companies like Figs, our preferred volume metric is active customers). While both are important, the latter is the most critical to analyze because prices have a ceiling.
Figs’s active customers came in at 3.02 million in the latest quarter, and over the last two years, averaged 6.4% year-on-year growth. This performance was underwhelming and suggests it might have to lower prices or invest in product improvements to accelerate growth, factors that can hinder near-term profitability. 
2. EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Figs’s full-year EPS dropped 21.5%, or 5% annually, over the last four years. We tend to steer our readers away from companies with falling revenue and EPS, where diminishing earnings could imply changing secular trends and preferences. Consumer Discretionary companies are particularly exposed to this, and if the tide turns unexpectedly, Figs’s low margin of safety could leave its stock price susceptible to large downswings.
3. Mediocre Free Cash Flow Margin Limits Reinvestment Potential
Free cash flow isn’t a prominently featured metric in company financials and earnings releases, but we think it’s telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Figs has shown poor cash profitability relative to peers over the last two years, giving the company fewer opportunities to return capital to shareholders. Its free cash flow margin averaged 8.2%, below what we’d expect for a consumer discretionary business.
Final Judgment
Figs falls short of our quality standards. With its shares underperforming the market lately, the stock trades at 36.8× forward P/E (or $10.75 per share). This valuation tells us a lot of optimism is priced in - you can find more timely opportunities elsewhere. We’d recommend looking at one of our all-time favorite software stocks.
Stocks We Would Buy Instead of Figs
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