Figs (NYSE: FIGURES) is the largest direct-to-consumer sales platform in the health apparel industry. The company debuted on the stock market in May 2021, and like many recent IPOs, the share price has fallen sharply. In fact, its stock price is down more than 50% from its all-time high. Still, there is a lot to love about this business including strong revenue growth, positive free cash flow, and an extremely loyal customer base.
In this Backstage Pass video, recorded on January 4Motley Fool contributor Jamie Louko explains why Fig could be a lucrative long-term investment.
Jamie Louko: Figs is a manufacturer of high quality hospital scrubs. They really try to make their clients like what they wear when they are at work, because these – whether in a dentist’s office or in the hospital – people wear these scrubs for 10, 12 hours a day or even Suite.
So this IPO business would be back in May. What I really love about this business is that their customers are so loyal to the brand. And that’s how I heard about this company. Even before the IPO and my girlfriend kept talking about it. I bought him more fig scrubs than I invested in the business, which I think is crazy. But let’s talk about their competitive advantage. Like I said, their customers are brand loyal and this has allowed them to develop a very strong brand. I saw Trevor smile there when I brought up Figs and maybe it is because he knows something about the company, but they are so well known in the hospital world and among healthcare professionals. . It’s just because their product is so great and they try to focus on direct to consumer sales which is the other competitive advantage that I find with this company.
Unlike most scrunch makers, they mainly focus on consumers instead of partnering with hospitals or other healthcare practices like dentists’ offices etc. This is really how they earn their brand name and customer loyalty because they are a direct consumer business. Excuse me.
It showed up in their financial statements. They’re a scrubs maker, but their gross margins are almost 73% which is absolutely insane for any clothing maker. Their brand has grown so popular that their sales and marketing expenses represent 35% of their income. We’ve looked at other companies that spend 50%, 60%, 70% of their revenue on sales and marketing, but their brand has grown into something so strong that they really don’t have to spend a ton on it. . Of course, it went up and down. They’re profitable, which you don’t often see with IPOs, but they’re profitable and they’ve generated a ton of free cash flow, nearly $ 51 million for the first three quarters of 2021. And their income growth is strong at 34%.
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