The initial optimism around Figma (FIG 1.38%) stock has given way to disappointment. In late July, it launched what initially looked like a successful IPO. However, optimism gave way to disappointment as the stock steadily slid after an initial bump. Today, the stock is down more than 25% from its IPO price of $33 per share.
Fortunately, a lot can change in five years. Thus, long-term investors can probably shrug off its recent performance, given the high probability of earning long-term gains over the next five years. Here's why.
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The state of Figma stock
Figma's cloud-based, collaborative design tools have attracted interest from customers and investors alike. Adobe attempted to buy the company, but its efforts to unseat Figma after abandoning the proposed merger have not succeeded. Knowing that, one can see why Figma stock debuted with a high degree of optimism.
So what happened?
For one, investors may not like its current financials. In the first nine months of 2025, revenue of $752 million rose 41%, compared to the same period in 2024.
Unfortunately, its operating expenses far surpassed its revenue. With that, its loss of just over $1 billion in the first three quarters of 2025 rose from $830 million in the same year-ago period despite the higher revenue.
Moreover, due to bottom-line losses, Figma does not have a P/E ratio, and its price-to-sales (P/S) ratio is 12. Also, no catalyst has emerged for the stock to begin its turnaround.
NYSE: FIG
Key Data Points
Why a long-term turnaround may be in sight
Still, the level of revenue increases makes Figma a growth stock, and considering that its forward P/S ratio stands at 9, the stock price has begun to seem more reasonable. As that trend continues, we could see a turning point for this beaten-down tech stock.
Additionally, at its IPO, Figma estimated its addressable market at $33 billion of annual revenue opportunity. Given its $1.05 billion in revenue estimate for 2025, the company appears to have barely tapped into its growth potential.
Furthermore, Bloomberg estimated that the average S&P 500 (^GSPC 1.23%) stock grew revenue by 5.6% in 2025. Figma's revenue growth rate far exceeds that level.
Also, while net losses remain a concern, the company generated $204 million in free cash flow in the first nine months of 2025. Around $1.1 billion in stock-based compensation led to the loss, meaning Figma generates enough cash to stay in business. That fact should counterbalance much of the concern surrounding the net losses.
Figma in five years
Thanks to rapid growth and a falling valuation, Figma stock should beat the market over the next five years.
Admittedly, the stock price continues to slide, and the increased losses amid rising revenues may raise concerns.
Still, its high stock-based compensation could mitigate concerns about the losses. Moreover, revenue growth shows it is working quickly to try to address its $33 billion total addressable market.
Those increases and the sliding stock price continue to take the P/S ratio to lower levels. Those levels have reached a point where the SaaS stock's price could turn soon, and as fast as its revenue has risen, a market-beating performance over the next five years looks increasingly likely.
