Is Now the Time to Buy Figma Stock?

Figma (NYSE: FIG) stock has underperformed in its short trading history. The stock's price has steadily fallen since the summer as the hype surrounding its July 31 IPO steadily fizzled.

However, after its earnings announcement for the fourth quarter of 2025 and the year's end, Figma stock reversed that trend and moved significantly higher. Does that apparent recovery mean now is the time to buy? Let's take a closer look.

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The state of Figma

Figma has become hugely popular for designing user interfaces. The tool brings teams together for this purpose, allowing for communication and the presentation of modifications in real time, dramatically reducing the potential for redundancy.

Figma was so popular that Adobe attempted to buy the company before the IPO. With regulators blocking that move, it has launched a competing tool that has so far failed to unseat Figma.

Nonetheless, as previously mentioned, that optimism has not translated into stock market success since the IPO nearly seven months ago. Currently, it sells at a discount of more than 80% from its intraday record high in early August.

What the numbers say

Despite the stock's performance, the company continues to grow. In 2025, its $1.06 billion in revenue rose 41% from year-ago levels.

Unfortunately, costs and expenses increased by 42% over the same period, and its operating expenses were more than double the revenue. Consequently, the $1.25 billion loss for the year came in substantially above the $732 million loss in 2024.

However, investors should not count the $1.36 billion in stock-based compensation as a non-cash expense. Thus, its free cash flow was $243 million, up from the $68 million in negative free cash flow in 2024. This means it can now cover operations without outside funding, though the stock-based compensation could bring some stock dilution in the future.

Valuation also offers mixed news. Without a profit, Figma has no P/E ratio, though its price-to-sales (P/S) ratio is 13. That is down from over 60 in early August, and such levels are not unusual for a growth stock like Figma. Still, that sales multiple is well above the S&P 500's average P/S ratio of 3.4, which makes it a riskier proposition.

Is now the time to buy Figma stock?

Under current conditions, Figma stock is a buy, but only for those with the risk tolerance for such a holding.

Indeed, given its losses and relatively elevated sales multiple, Figma remains highly risky, so only risk-tolerant investors should consider this stock.

Still, many successful tech stocks sell for well over 13 times sales. Moreover, the 41% revenue growth and the turn to positive free cash flow could spark a much-needed turnaround.

Since it's unclear whether Figma will stop dropping soon, investors should add shares slowly. However, Figma stock is in a position where its massive growth could finally translate into stock gains, making it more likely to deliver market-beating returns in the long term.

Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Adobe and Figma. The Motley Fool recommends the following options: long January 2028 $330 calls on Adobe and short January 2028 $340 calls on Adobe. The Motley Fool has a disclosure policy.