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35% less than the highs, is this recent IPO a buy?

Healthcare  -parel company PICTURES (FIG. -6.83% ) has fallen sharply from its post-IPO highs, but business  -pears to be in full swing. In this Fool Live video clip, recorded on November 8th, Fool.com contributors Matt Frankel and Danny Vena discuss FIG’s business and why it might be worth a look now.

Danny Vena: FIG is a company that provides scrubs for healthcare professionals. Well, do you mean scrubs? Why should that be a big deal? It’s a big deal because right now there are only a few companies that supply scrubs to the medical community and these are big corporations that have been doing this for years so FIG is the little disruptor.

What FIG did was they had a couple of people saying, “Scrubs are baggy, they’re boxy, they’re uncomfortable, they’re not figure-hugging, we don’t like the material,” and they came up, basically they have built a better mousetr -. They created more comfortable, form-fitting, and snug-fitting scrubs, and basically a homework is sprouting out of the trunk of a car. They went to the parking lots. To be honest, that’s the genesis that fascinates me. They sold these things from the trunk of the two founders’ cars, in the parking lots of hospitals and emergency rooms.

The people who buy them love them. They have something of a cult following that is growing and that is what for me is really looking at finances and finances are fine. But for me, it’s the cult that piqued my interest. If you look at revenue in the second quarter, it’s up about 58% year over year. Their active customer base has grown by 80% and what is interesting is that they are getting closer to profitability. They’re already profitable on an adjusted basis, but I don’t like these numbers that much on an adjusted basis.

You’re still losing money on a GA – basis. But the fact is the cult. The people who earn their living with it, the medical professionals, really want to wear them and that’s what interested me most and that’s why I bought shares relatively soon after the IPO, which is unusual for me.

Matt Frankel: If I only speak to the cult, my wife is a medical professional. She runs an intensive care unit near us. I’m not home right now, but there is usually a packet of figs on the desk behind me. She buys her scrubs very often. Not a week goes by without a FIG item of clothing standing in front of our door, so a couple of points.

Healthcare is the largest employment sector in the United States. More healthcare workers than any other industry. It is the only major form of employment that requires a uniform where employees buy their own uniforms. If you think how police officers, firefighters, their uniforms are issued, they are very standardized. Healthcare professionals buy scrubs, they have to buy their own, so that’s one thing.

There are other brands of exfoliators, but they are all very standardized. They’re just a generic off-the-shelf product, somehow more convenient than others. Some had really cute little brands, like a Grey’s Anatomy brand, to make scrubs. But it’s essentially the same product. FIG is a different product, they want to be comfortable, they want to be fashionable and see that as something Nike (FROM 0.14% ) and Under armor (UA 0.10% )(UAA -0.13% ) Did. They wanted to take things that historically weren’t very convenient. There wasn’t any sweat-wicking equipment until Under Armor hit the market and that’s what FIG wants to do.

You want to transform it, make it more useful, practical, and convenient, and there are many adjacent revenue opportunities. Under Armor no longer only produces these shirts. Nike no longer just produces sports shoes. They produce many adjoining accessories that people who love Nike shoes buy. The people who love Under Armor shirts buy these other products. That’s what I would say about FIG in terms of market opportunities, it takes a lot to get me excited about a clothing company.

This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – including one of our own – helps us all think critically about investing and make decisions that will help us get smarter, h -pier, and richer.

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