the buzzword of medical scrubs, climbed nearly 17% after Wall Street analysts started to cover the stock and praised its growth potential.
Founded in 2013 by co-CEOs Heather Hasson and Trina Spear, FIGS (ticker: FIGS) seeks to transform the medical clothing industry. The company sells skin-tight scrubs – for both men and women – made from its proprietary FIONx fabric, which offers four-way stretch and has anti-odor, anti-wrinkle and anti-humidity properties. The company went public in May at $ 22. On Monday, shares rose 16.84% to close at $ 42.53.
FIGS is a technology-based direct-selling brand disrupting the $ 79 billion plus health apparel industry that has historically consisted of thousands of small brick and mortar retailers lacking a strong digital presence, said Jason Helfstein and Brian Nagel, both
managing directors and senior analysts, in a research note. (Helftein covers the internet industry while Nagel focuses on consumer growth and e-commerce.)
FIGS is moving towards a younger clientele, said Helfstein and Nagel. The company is already “very profitable” with earnings of 26% before interest, taxes, depreciation and amortization, or EBITDA, margin for fiscal 2020, they said.
Helfstein and Nagel see “a long avenue for growth, given that there is sufficient room for the expansion of the US / international market and the early development of the FIGS lifestyle product offering”. They launched a cover of FIGS with an outperformance rating and a 12-18 month price target of $ 45.
The company’s total addressable North American market is expected to grow to $ 16 billion by fiscal 2025 and $ 19 billion by 2030, said John Kernan, a research analyst covering the retail and brands industry. specialized consumption for Cowen. FIGS’s market share in the United States is expected to grow to 6% by FY2025, from 3% in FY2021, and 9% by FY2030, said Kernan, who also launched the stock with an outperformance and a price target of $ 43. He predicts FIGS’s active customers to grow to 1.7 million in fiscal 2021, according to a research note.
According to FIGS, 85% of healthcare workers buy their own healthcare / medical clothing and their average annual spend is around $ 570. The average career in healthcare spans 36 years, which means healthcare workers spend more than $ 20,000 over their lifetimes on clothing, said Cowen’s Kernan.
About 13 of the FIGS styles – mostly scrub clothing – generate 82% of his net income, he said. Kernan is modeling a path to $ 2.58 billion in sales and $ 278 million in free cash flow, which he says can happen by fiscal year 2030 or before, according to the note.
FIGS is one of the few companies – like
(CROX) and Jordans – where its brand has “become a name for the product it represents,” said Edward Yruma, managing director of KeyBanc Capital Markets, in a note Monday.
“We have learned that once you reach this tipping point, and in tandem with a commitment to innovation, the bottom line remains strong and proves to be sustainable,” said Yruma, who attributed to the shares an overweight rating and a price target of $ 45.
FIGS trades at 62 times estimated enterprise value in 2022 versus EBITDA, 11.6 times estimated enterprise value in 2022 versus sales and 15.9 times estimated enterprise value in 2022 relative to gross profit, Yruma said.
FIGS is run by its co-founders and Yruma believes they have a strong relationship. “While we believe the structure works for FIGS, the track record of successful dual-CEO structures is not extensive. The two CEOs appear to have different areas of interest and strengths, which in our opinion allows for a clear delineation of responsibilities, ”said Yruma.
FIGS revolutionized the health clothing industry and moved from a health clothing brand to a lifestyle brand, said Robert Drbul, senior managing director of Guggenheim Partners, in a research note. He expects estimated revenue of $ 378 million in 2021, along with around 70% gross margins and 20% Ebitda margins over the next three to five years.
FIGS could approach and possibly exceed $ 1 billion in estimated net income in 2025, said Drbul, who valued FIGS to buy with a price target of $ 45. “We think this company is very well positioned [to] generate high levels of above-average growth rates in revenue and bottom line for several years to come, with organically constructed revenues and structurally advantageous gross margins, ”he said.
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