$FIGS – Is this Lululemon 2.0?

I'm considering jumping into this company for the long term as the growth potential looks attractive – would be interested to hear thoughts around my thinking.

Here's what stands out to me about the company:

• Strong brand recognition: FIGS has positioned itself as a premium D2C brand in the medical apparel market in the US – almost cult-like.

• Potential market size: The healthcare industry is projected to grow, leading to increased demand for medical apparel. The company is also venturing into broader markets outside of healthcare (Casual wear). There's also a lot of room of potential international expansion (Sales are nearly all US based at the moment).

• Experienced management: FIGS' management team has a strong track record and the CEO has extensive experience building successful companies.

• Strong financials: Company grew revenue from $110mil to $420mil from 2019 – 2021. Gross margin is 70% (D2C = more margin). Very little debt. Total addressable market in the US alone is $12 Billion.

Here's some of the potential downsides

• No Moat: There is no moat to this company apart from the brand value. Brand value is obviously still a huge advantage though IF it isn't diminished over time. This is obviously a big risk. Huge companies such as LULU and NKE have pulled this off though with comparable moats.

• Unproven market size: It's not clear whether the brand will take off in other countries in the same way it has in the US. In the UK for example, scrubs are provided by the hospital. It's also debatable how successfully FIGS can be in their attempt to appeal to those outside of the healthcare industry with their casual-wear. Once again, Lululemon succeeded at this niche-market-to-wider-market strategy (Yogawear -> Sportswear), but it's not clear whether FIGS can execute a similar strategy just yet.

• P/E: Currently trading at a P.E of 51, which looks expensive. I'm not too concerned about this though given that it's a growth stock – they're throwing everything back into the business, and their net profits (and P/E) will look a lot more attractive once optimised for profits. Their current revenue numbers and trajectory compared to their current market cap of 1.4 billion makes this look like a reasonable current valuation in my opinion.

Keen to hear your thoughts!