• Wondering if Figma at around US$21.75 a share is a bargain or a value trap? This article walks through what the current price is really telling you about the stock.
• The stock has been volatile recently, with the share price down 14.7% over the past week but up 12.8% over the last 30 days, and it remains down 42.2% year to date.
• Recent headlines have focused on Figma's position in the broader software sector and ongoing interest in collaboration tools, which helps frame how investors are reacting to the stock. At the same time, market commentary has highlighted changing risk appetite toward growth oriented software companies, which may be shaping these swings in Figma's share price.
• Figma currently scores a 2 out of 6 valuation score. This suggests some checks point to the stock being undervalued while others do not. The next sections will compare different valuation approaches and then finish with a broader way to think about what the market might be missing.

Figma scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Figma Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a stock could be worth by projecting the company’s future cash flows and then discounting them back to today’s value using a required rate of return.

For Figma, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is about $235.1 million. Analyst projections and subsequent extrapolations point to free cash flow of $500.7 million by 2029, with further estimates running out to 2035, all expressed in US dollars.

Based on these cash flow projections, Simply Wall St’s model arrives at an estimated intrinsic value of about $27.41 per share. Compared with the recent share price around $21.75, the DCF output implies the stock trades at roughly a 20.6% discount to this estimate. Within the context of this model, this suggests Figma may be undervalued relative to that intrinsic value estimate.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Figma is undervalued by 20.6%. Track this in your watchlist or portfolio, or discover 49 more high quality undervalued stocks.

Approach 2: Figma Price vs Sales

For companies where earnings are not the main focus yet, price based on revenue can be a useful guide. The P/S ratio tells you how much investors are paying for each dollar of sales, which can be helpful when a business is still investing heavily and profits are less clear.

What counts as a "normal" or "fair" P/S ratio often reflects how quickly investors expect revenue to grow and how comfortable they are with the risks. Higher growth expectations or lower perceived risk can support a higher multiple, while slower expected growth or higher risk usually points to a lower multiple.

Figma currently trades on a P/S ratio of 9.90x. This is higher than the Software industry average of 3.60x and above the peer group average of 6.03x. Simply Wall St also calculates a Fair Ratio of 9.11x for Figma, which is the P/S multiple suggested by factors such as earnings growth, industry, profit margin, market cap and risks.

The Fair Ratio is often more useful than a simple comparison with peers or the industry because it adjusts for company specific traits like growth, margins, risk profile, sector and size, rather than assuming all software stocks deserve the same multiple.

Compared with the Fair Ratio of 9.11x, Figma’s current P/S of 9.90x is higher, which indicates that the stock may be overvalued on this measure.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Figma Narrative

Earlier the article mentioned that there is an even better way to think about valuation. On Simply Wall St this takes the form of Narratives, where you choose the story you believe about Figma, link that story to concrete forecasts for revenue, earnings and margins, and see the Fair Value that falls out of those assumptions alongside the current market price.

Each Narrative is a joined up view that connects what you think is happening with Figma as a business to a full financial model, and then to a clear Fair Value number, all presented in an accessible tool on the Community page that is already used by millions of investors.

For Figma, one investor might align with a more cautious Narrative that anchors closer to a Fair Value around US$18.79, while another might side with a more optimistic Narrative that points toward a Fair Value around US$92.12. By comparing those Fair Values to the current share price, both investors can decide whether that story suggests the stock looks expensive or offers a margin of safety.

Because Narratives on Simply Wall St update automatically when new information such as earnings releases or major product news is added to the platform, your chosen story, its forecasts and its Fair Value stay current without you needing to rebuild the entire model every time something changes.

For Figma however, we will make it really easy for you with previews of two leading Figma Narratives:

Fair Value: US$65.25

Implied discount to this fair value: about 66.7% relative to the recent price around US$21.75.

Revenue growth assumption: 21.2% a year.

• Analysts build this view around Figma growing into a larger, profitable software business, with revenue of about US$1.7b and earnings of US$214.1m by around 2028, discounted back at 8.5%.
• The narrative assumes margins eventually align with the wider US software sector and that the stock trades on a P/E of about 236x those future earnings, which is higher than the current industry P/E of 31.9x.
• It also bakes in steady share count growth of 7% a year and continued adoption of Figma’s platform as AI features and deeper integrations support long contracts and higher account spending.

Fair Value: US$18.79

Implied premium to this fair value: about 15.7% relative to the recent price around US$21.75.

Revenue growth assumption: 30% a year.

• This user driven view sees Figma as a strong product that is already deeply embedded in many teams, but questions whether the stock price gives too much credit for that strength.
• The narrative assumes solid revenue growth and margins trending toward about 15%, with the stock eventually trading on a P/E of roughly 35x once earnings mature, which keeps expectations elevated.
• Key watchpoints in this view are competition from Adobe, Canva and others, the cost and payoff of AI features, and the risk that Figma is treated more like a mature software company if growth or pricing power cools.

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

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.