Is FIGS Overvalued Despite Strong Q3 Earnings and Raised Guidance?

The recent surge in FIGS Inc. (NYSE: FIGS) shares, driven by a stellar Q3 2025 earnings report and raised full-year guidance, has sparked a critical debate among investors: Is the stock's valuation justified by its fundamentals, or is the market overreacting to short-term optimism? While the company's financial performance demonstrates operational strength and margin improvement, its valuation metrics starkly contrast with industry benchmarks, raising questions about sustainability.

A Strong Earnings Catalyst

FIGS delivered a Q3 2025 performance that exceeded expectations, reporting net revenues of $151.7 million-a 8.2% year-over-year increase-against a consensus estimate of $142.52 million, according to a FIGS earnings release. This growth was fueled by higher average order values and customer acquisition, reflecting the effectiveness of its direct-to-consumer (DTC) strategy. The company's net income margin of 5.8% and adjusted EBITDA margin of 12.4% also marked significant improvements compared to the prior year, according to the FIGS earnings release. These results, coupled with an upgraded full-year revenue growth forecast of 7.0% and higher EBITDA margins, justified the stock's 52-week high of $8.89 on November 7, 2025, according to a Market Minute article.

Valuation Realism: Metrics Tell a Different Story

Despite the bullish earnings report, FIGS' valuation metrics suggest a disconnect between current stock prices and industry norms. As of November 10, 2025, the company trades at a price-to-earnings (P/E) ratio of 134.2, significantly higher than the Consumer Cyclical sector average of 20.06, according to a Full Ratio P/E analysis. This ratio, while 70% below its 5-year historical average, still implies that investors are paying a premium for earnings growth. Similarly, the price-to-sales (P/S) ratio of 3.33-compared to an industry peer average of 0.38-indicates that the market is valuing FIGS at nearly nine times the revenue-based benchmark, according to a Sahm Capital article.

The enterprise value-to-EBITDA (EV/EBITDA) ratio further highlights this disparity. At 34.60, FIGS lags far behind the median 10.08 for the Apparel & Accessories industry, according to a GuruFocus EV/EBITDA analysis. This suggests that while the company's margins are improving, its enterprise value remains inflated relative to cash flow generation. Such metrics raise concerns about whether the stock's recent gains are anchored in fundamentals or speculative momentum.

Market Optimism vs. Pragmatic Caution

The market's enthusiasm for FIGS appears rooted in its DTC model's scalability and the growing demand for specialized healthcare apparel. The company's ability to maintain high margins despite rising competition underscores its brand equity and customer loyalty, according to a Market Minute article. However, investors must weigh these positives against macroeconomic headwinds, such as potential interest rate volatility and sector-specific risks like supply chain disruptions.

A key question remains: Can FIGS sustain its revenue growth and margin expansion to justify its elevated valuation? While the company's Q3 results are impressive, the healthcare apparel market is still niche, and scaling further may require significant capital or strategic partnerships. For instance, the P/S ratio of 3.33 implies that investors are betting on future revenue growth rather than current profitability-a bet that could backfire if expansion efforts underperform.

Conclusion: A Tug-of-War Between Hype and Fundamentals

FIGS' recent performance demonstrates its operational prowess and market positioning, but its valuation metrics suggest a tug-of-war between market optimism and valuation realism. While the stock's rally is understandable given its earnings beat and guidance upgrade, investors should remain cautious about the disconnect between its P/E, P/S, and EV/EBITDA ratios and industry benchmarks. For long-term investors, the key will be monitoring whether FIGS can translate its current momentum into sustainable growth that justifies its premium valuation.