What happened
Shares of Figs (FIGS 1.48%) popped 26.2% this week, according to data from S&P Global Market Intelligence. The recently public stock didn't have any material financial news announced this week, but management did announce the company was partnering with the Say platform to allow retail investors to ask questions on its upcoming earnings call.
So what
Typically, when a company makes an immaterial announcement like this, which is just allowing access for investors and changes nothing about the company's underlying business, the stock will not move. But in this era of meme stocks and enthusiastic retail investors, an announcement like this can cause a huge jump in the share price. This looks to be what happened with Figs this week, as there was no other news released from the company and the stock jumped the same day the news release was put out.
Image source: Getty Images.
Figs will be updating investors with its third-quarter results on Nov. 10. The apparel company sells clothes to healthcare workers like nurses and doctors through a direct-to-consumer (DTC) e-commerce model. In the second quarter, Figs revenue grew 57.6% year over year to $101.1 million, while active customers grew 79.2% to 1.6 million. Investors are likely looking for this high growth to continue when Figs releases its earnings for Q3.
Now what
With a market cap of around $7 billion, Figs stock trades at a price-to-sales ratio (P/S) of 20 based on its trailing-12-month revenue. This is very expensive for an apparel company and should make investors cautious before deciding to buy shares in this business. However, if you believe the company can maintain this high double-digit revenue growth and expand its customer base over many years, then you could do fine from here with an investment in Figs.
