Figma stock has fallen 61.0% over the past year, yet the current share price around US$27.44 still screens as expensive when checked against an intrinsic value estimate based on a Discounted Cash Flow, and against simpler market multiples.

• The 61.0% one year decline raises the question of whether the market has simply reset expectations or is still pricing Figma at too rich a level.
• Expectations for future revenue growth can support a premium today, while any slowdown in converting that growth into sustainable cash flows may weigh heavily on what investors are willing to pay.
• On Simply Wall St's broader checks, Figma scores 0 out of 6 on valuation, which suggests the stock does not screen as a clear bargain across metrics such as intrinsic value, earnings, cash flows and assets (0 out of 6 valuation score).

The issue now is whether Figma's recent share price level leaves enough upside relative to its intrinsic value estimate to compensate for the risks in the business.

Has Figma Run Too Far on Cash Flow?

The Discounted Cash Flow (DCF) model here projects Figma’s future free cash flows and brings them back to today’s dollars. On the latest figures, Figma generated trailing twelve month free cash flow of about US$229.3 million, with the model assuming that these cash flows continue growing over time rather than shrinking.

On that basis, the 2 Stage Free Cash Flow to Equity model points to an estimated intrinsic value of about $23.53 per share. Against the current share price around $27.44, the DCF implies the stock trades at roughly a 16.6% premium to that intrinsic value, indicating that the market is currently paying a higher price relative to Figma’s projected cash generation under this model.

On this DCF view, Figma stock currently appears overvalued relative to its modelled cash flows.

Our Discounted Cash Flow (DCF) analysis suggests Figma may be overvalued by 16.6%. Discover 49 high quality undervalued stocks or create your own screener to find better value opportunities.

Has Figma Run Too Far on Sales?

P/S is a useful cross check for Figma because the business is still heavily focused on scaling revenue rather than bottom line earnings.

Figma currently trades on a P/S of about 11.4x, compared with an industry average for Software of around 3.9x and a peer group average near 10.7x. On Simply Wall St’s model, a fair P/S ratio for Figma, given its profile and risk, is closer to 9.3x.

That gap means the stock trades above both the tailored fair ratio and the broader peer benchmark on a sales basis. At today’s price, investors are paying a higher multiple of each dollar of Figma’s revenue than the model suggests is warranted by its fundamentals.

On the P/S multiple, Figma stock screens as overvalued relative to both peers and the modelled fair ratio.

The Figma Narrative: What Would Justify Today's Price?

Figma Narratives on Simply Wall St’s Community page pick up where the valuation puzzle leaves off by spelling out which assumptions about Figma's future growth, margins and earnings would need to play out for the stock to be worth materially more or less than today's price. Where a single valuation ratio or model gives you one figure, these narratives describe the future that figure depends on so you can track whether that story is still playing out over time.

Community views on Figma are wide apart, with one side seeing meaningful upside while another warns that the stock price already bakes in a lot.

Bull case: 10% undervalued

"Rapid adoption of AI native workflows through Figma Make, MCP server and governance grade capabilities is expanding use cases beyond core designers to PMs, researchers and developers, which should sustain high net dollar retention and accelerate seat and product expansion driven revenue growth…"

Bear case: 23% overvalued

"A great product can still be an expensive stock. For now, I’m more confident in Figma’s competitive position, but I would want clearer operating leverage before becoming materially more optimistic about the valuation…"

Do you think there's more to the story for Figma? Head over to our Community to see what others are saying!

The Bottom Line

For Figma, both the Discounted Cash Flow (DCF) intrinsic value estimate and the sales multiple view currently point in the same direction. The stock screens as overvalued, with the market asking a premium to the modelled cash flows and to the suggested fair P/S ratio.

Given the weak broader valuation checks, the burden of proof now sits with Figma’s ability to turn its revenue base into durable, scalable free cash flow. The key question for investors is whether future margin progress and cash generation can grow into the current valuation, or whether the premium narrows if that progress is slower than hoped.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.