Shares of FIGS (FIGS -0.21%) are skyrocketing following the release of the company's much-better-than-expected fourth-quarter results. The stock was up roughly 21.5% as of 2:30 p.m. ET Wednesday.
FIGS posted non-GAAP (adjusted) earnings per share of $0.09 on revenue of $128.7 million, while the average analyst estimate had called for adjusted earnings per share of $0.03 on sales of approximately $128.1 million. The fashion-focused scrubs and medical apparel company's guidance for revenue between $550 million and $560 million this year was also significantly ahead of the average analyst estimate's previous call for sales of $547.64 million in 2022.
Image source: FIGS.
Should investors buy FIGS stock?
FIGS' midpoint guidance calls for annual revenue growth of roughly 32% compared to the $419.6 million in sales that it posted last year. That suggests the business is on track to continue enjoying solid expansion momentum in the near term, but the target does point to a significant growth deceleration from the 59.5% sales increase that the company posted last year.
The company is also guiding for a gross margin above 70% and an adjusted operating margin above 20%, which points to the business continuing to command impressive pricing power. Scrubs and other medical-apparel items are typically low-margin products, but FIGS' brand strength and design differentiation are leading to wins with an underserved market.
The specialization in scrubs and other medical-apparel products that are more fashionable than generic alternatives has the business operating in a niche that currently has little in the way of competition. The e-commerce-focused company could also benefit from the fact that medical apparel tends to be replaced relatively frequently, giving the business recurring revenue opportunities so long as it maintains strong relationships with its customer base.
FIGS had its initial public offering (IPO) last June and hit the market at a time when investors were beginning to move out of growth-dependent companies -- and e-commerce stocks in particular. Even with today's big stock gains, the company's share price is still down about 43% from its closing price on the day of its IPO. For investors who see promise in the business's long-term expansion potential, the company's Q4 report and subsequent stock pop should probably be viewed as an encouraging sign rather than an indication that it's too late to buy shares.
