For the fourth day in a row, Figs (FIGS -0.70%) stock is growing -- up 3.5% through 9:45 a.m. ET -- and some analysts think it's ripe for more.
Shares of the supplier of scrubs to medical industry workers gained for two days ahead of earnings last week -- then surged nearly 27% on earnings day after reporting twice as much profit as Wall Street had forecast. Not everyone was impressed; Telsey Advisory lowered its price target on Figs stock to $16 after the report. But two other analysts, Adrienne Yih at Barclays and Ashley Owens at KeyBanc, begged to differ -- both raising their price targets to $20 per share.
And predicting Figs stock could rise another 36% in the next 12 months.
Image source: Getty Images.
Figs' Q2 earnings report
Figs grew its sales 29% year over year last quarter, to $196.6 million, booking both more orders and bigger orders from its customers. Scrubs sales grew 26%, non-scrubs sales grew 40%, and international sales of both grew 67%.
With numbers like these, though, why did even one out of three (stock) doctors surveyed say that Figs stock might not go up much more?
NYSE: FIGS
Key Data Points
How to value Figs stock
A seemingly high P/E ratio could be one reason. Figs' price-to-earnings ratio is a lofty 38x, which may seem expensive relative to even 29% sales growth. But here's the thing:
Figs grew its earnings much faster than its sales, with GAAP net profit up 300% year over year. Free cash flow flipped from negative to positive, and over the past 12 months, Fig has generated $97 million in positive FCF -- about 60% more than its reported profit.
Valued on FCF and adjusted for net cash, I get a 22x enterprise value-to-FCF ratio for Figs stock. At its current growth rate, that makes Figs stock dirt cheap.
