Figs (FIGS +0.74%) stock is seeing strong gains in Friday's trading. The nursing-scrubs specialist's share price was up 27.4% as of 2:15 p.m. ET, according to data from S&P Global Market Intelligence.
Figs published results for its third quarter after the market closed yesterday. While the company's earnings were in line with the market's expectations, the business posted quarterly sales that topped Wall Street's target. Even better, it increased its full-year performance target.
NYSE: FIGS
Key Data Points
Customer additions power sales growth for Figs
Figs posted adjusted non-GAAP (generally accepted accounting principles) earnings per share of $0.03 on revenue of $142.4 million. Adjusted earnings were in line with the average analyst estimate, but sales managed to beat the forecast by roughly $11 million. Third-quarter revenue was up roughly 10.7% compared to performance in Q3 last year.
While the company's average net revenue per active revenue declined 6.6% year over year to $212, its total active customer count increased 19.6% to reach 2.6 million. With solid expansion for Figs' active customer base, investors are feeling more bullish about the stock.
What comes next for Figs?
For the full-year period, Figs now expects overall revenue to grow roughly 8.5% year over year. Previously, the company had guided for a sales increase between 5.5% and 7.5%.
Management also raised its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin target to approximately 14%. Prior to the recent Q3 update, Figs had forecasted an adjusted EBITDA margin between 12.5% and 13.5% for the year.
FIGS PE Ratio (Forward) data by YCharts
Following today's gains, Figs is now valued at roughly 75 times this year's expected earnings. With such a growth-dependent valuation, the company will need to post strong sales growth and margin expansion in order to deliver wins for long-term shareholders.
If the business can carve out a lasting niche and continue to improve operational efficiency, the stock could see impressive gains above current levels. But investors should keep in mind that some strong performance is already factored into Figs' valuation before betting heavily on the stock.
