LEVI

Based on a comprehensive review, LEVI presents a mixed but cautiously optimistic investment case.

From a technical perspective, the stock is experiencing near-term weakness and has significantly underperformed the market, putting it closer to an oversold condition. This high-beta stock's recent decline could present a potential entry point if fundamentals support a rebound. Fundamentally, the company is showing strong operational improvement with robust revenue growth and a dramatic surge in profitability last quarter. Strengthened by a moderate debt load, these results are encouraging, though concerns remain regarding weak cash flow generation and operational inefficiencies highlighted by a very high cash conversion cycle. The valuation appears reasonable on earnings and sales metrics, but the lack of peer comparison data makes it difficult to assess its relative attractiveness.

Recommendation: HOLD

While the improving profitability and reasonable valuation are positive, the stock's recent negative momentum, weak cash flow, and high operational inefficiencies warrant caution. Investors should wait for signs that the strong quarterly profit gains are sustainable and that operational challenges, particularly the slow inventory turnover, are being effectively addressed. The current price may be attractive for risk-tolerant investors, but a more conservative approach is to monitor for confirmation of a sustained turnaround before establishing a new position.

RockFlow Model Forecast: Three Scenarios for 2026

Based on a comprehensive analysis, the 12-month outlook for LEVI is cautiously optimistic, supported by fundamental strength but tempered by operational challenges.

Key catalysts for a rebound include the company's impressive surge in profitability, robust revenue growth, and a reasonable valuation that could attract investors if recent operational improvements prove sustainable. The stock's current oversold condition also presents a potential technical entry point. Potential risks center on weak cash flow generation and significant operational inefficiencies, as evidenced by a very high cash conversion cycle, which could hinder performance if not addressed. Given the mixed signals, the analyst consensus target price of approximately $27 suggests an upside of over 25%, but achieving this will likely require the company to demonstrate consistent execution and improved working capital management. A hold rating is prudent until these operational trends solidify.

Wall Street Consensus

Most Wall Street analysts are optimistic about LEVI's 12-month outlook, with consensus target around $27.21, indicating expected upside potential.

Overall, LEVI has investment potential but also faces challenges. Here are key factors to weigh before investing.

LEVI has demonstrated notable volatility over the past year, characterized by a substantial recovery from its 52-week low but experiencing recent pressure over a three-month timeframe. The stock's performance reflects its high beta, indicating it is more volatile than the broader market. Overall, it remains in a recovery phase but has lost momentum recently.

Short-term performance shows modest gains over one month, though it has declined significantly over three months. More critically, LEVI has underperformed the market by over 12% in that period, highlighting relative weakness. This suggests the stock has faced specific headwinds not fully shared by the general market.

Currently trading near the midpoint of its 52-week range, LEVI is neither severely overbought nor oversold based on this metric. However, the recent three-month decline and significant underperformance suggest the stock is nearer to being oversold than overbought from a momentum perspective. The high beta implies the current price is susceptible to sharp moves in either direction.

Revenue & Profitability: Levi's demonstrated solid revenue growth in Q3 2025, increasing to $1.54 billion from $1.45 billion in the prior quarter. Profitability improved materially, with the net income ratio surging to 14.1% from 4.6%, reflecting better cost management as operating income more than doubled sequentially despite a slight contraction in the gross margin.

Financial Health: The company maintains a moderate debt level with a debt-to-equity ratio of 1.18 and a manageable interest coverage of 13.4x. However, cash flow generation appears weak, with a negative free cash flow per share and a low cash flow to debt ratio, indicating potential pressure on liquidity from working capital or capital expenditures.

Operational Efficiency: Operational efficiency showed improvement, with return on equity rising to 10.1% in the quarter. However, underlying asset utilization remains a challenge, as indicated by a low asset turnover of 0.23 and a very high cash conversion cycle of 143 days, primarily driven by slow inventory turnover.

Valuation Level: LEVI appears modestly valued based on its current metrics. The trailing P/E of 16.2 and forward P/E of 14.4 suggest reasonable earnings pricing, though the PEG ratio of 1.52 indicates the stock may be slightly richly valued relative to its growth prospects. The PB ratio of 3.8 appears elevated, but the PS ratio of 1.3 and EV/EBITDA of 10.3 suggest moderate pricing on sales and operating cash flows.

Peer Comparison: Unfortunately, a comprehensive peer comparison cannot be conducted as industry average data is not available. Without benchmark data for apparel manufacturers or denim specialists, it's impossible to determine whether LEVI's valuation multiples represent a premium or discount to its industry peers. This lack of comparative context limits the ability to make definitive conclusions about relative valuation.

LEVI exhibits elevated volatility risk, as evidenced by its beta of 1.335, indicating the stock is approximately 33% more volatile than the broader market. This heightened sensitivity to market swings is further confirmed by a significant one-year maximum drawdown of -34.9%, highlighting the potential for substantial capital depreciation during downturns. Investors should be prepared for above-average price fluctuations compared to the overall market.

The stock faces manageable but notable other risks. A short interest of 4.01% suggests a modest level of skepticism from bearish investors but is not at an extreme level that would signal severe fundamental concerns. While specific liquidity metrics are not provided, the combination of moderate short interest and the stock's market capitalization generally suggests adequate liquidity for most investors, though wider bid-ask spreads could be a consideration during periods of high volatility.