LEVI

Based on a holistic review, my analysis suggests LEVI presents a case of conflicting signals, making it a cautious hold rather than a compelling buy at this juncture.

From a technical perspective, the stock shows weak momentum, significantly underperforming the broader market. While it has rebounded from its 52-week low, the persistent negative trend and lack of bullish characteristics suggest caution. Fundamentally, Levi's exhibits operational strengths with solid revenue growth and a notable improvement in net margin, indicating effective cost management. However, weak free cash flow and inefficient inventory management, with capital tied up for extended periods, highlight ongoing operational challenges. The valuation is mixed; while the forward P/E and PEG ratio suggest potential undervaluation, elevated metrics like EV/EBITDA signal a premium relative to the company's asset base.

Recommendation:

LEVI is currently a HOLD. The company's improved profitability is encouraging, but it is offset by weak technical momentum, cash flow concerns, and a valuation that is not decisively cheap. Investors should wait for evidence of sustained operational efficiency improvements and a more positive technical trend before considering a position. The stock's high volatility also adds risk for those seeking stability.

*Note: This is not investment advice, for reference only.*

RockFlow Model Forecast: Three Scenarios for 2026

Based on a comprehensive analysis, the 12-month outlook for LEVI is one of cautious neutrality.

Key catalysts for potential upside include the continuation of solid revenue growth driven by brand strength and effective cost management, which could lead to improved profitability and a re-rating of the stock if inventory management and cash flow generation show sustained improvement. The primary risks center on persistent operational headwinds, specifically weak free cash flow and high inventory levels that tie up capital, alongside the stock's weak technical momentum and high volatility relative to the market. Given the mixed valuation signals and lack of a clear analyst consensus target, a reasonable 12-month price range is $19 - $25, implying a potential for moderate appreciation contingent on operational improvements, but with significant downside risk if execution falters.

Wall Street Consensus

Most Wall Street analysts are optimistic about LEVI's 12-month outlook, with consensus target around $21.40, indicating expected upside potential.

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

LEVI has demonstrated weak overall performance, sitting well below its 52-week high despite a substantial recovery from its low. The stock has significantly underperformed the broader market over the past three months, indicating persistent negative momentum.

Short-term performance has been poor, with LEVI declining 1.11% over one month and a more substantial 13.22% over three months. This performance is notably weak compared to the market, as evidenced by its -16.5% relative strength, suggesting company-specific challenges are driving the underperformance.

Currently priced at $21.40, LEVI is in the upper half of its 52-week range ($12.17-$24.82), positioning it closer to neutral territory than overbought or oversold extremes. While the stock has rebounded considerably from its low, its continued weakness versus the market and recent negative momentum suggest it is not exhibiting strong bullish characteristics at present.

Revenue & Profitability Levi's demonstrated strong revenue growth with a 6.7% sequential increase from Q2 to Q3 2025 ($1.45B to $1.54B), while profitability improved significantly with net margins expanding from 4.6% to 14.1%. The company maintained a healthy gross margin above 61%, though operating margin improved notably to 10.8% in Q3, indicating better cost controls despite the revenue growth.

Financial Health The company maintains moderate leverage with a debt-to-equity ratio of 1.18 and a manageable debt ratio of 38.3%, supported by a solid interest coverage ratio of 13.4x. However, cash flow generation appears weak with negative free cash flow per share and a low cash flow to debt ratio of 0.01, suggesting some pressure on liquidity despite adequate current and quick ratios.

Operational Efficiency Operational metrics show mixed results with a respectable return on equity of 10.1% but concerning inventory management, evidenced by high days inventory outstanding of 196 days and low inventory turnover of 0.46. The extended cash conversion cycle of 143 days indicates capital is tied up in working capital, though asset turnover of 0.23 is reasonable for the apparel industry.

Valuation Level: LEVI appears to present a mixed valuation picture. The forward P/E of approximately 10.1 and a PEG ratio significantly below 1.0 suggest strong undervaluation based on earnings growth expectations. However, the elevated EV/EBITDA of over 48 and a PB ratio of nearly 4.0 indicate premium pricing relative to the company's asset base and operating profitability, which tempers the overall attractive valuation signal from the earnings multiples.

Peer Comparison: A definitive peer comparison cannot be performed as the required industry average data is unavailable. To accurately assess LEVI's relative valuation standing, key industry benchmarks for P/E, PB, PS, and EV/EBITDA ratios would be necessary. Without this context, the analysis remains limited to an absolute assessment of the company's individual metrics.

Volatility Risk: With a beta of 1.329, LEVI exhibits approximately 33% more volatility than the broader market, indicating a higher sensitivity to market swings. This is corroborated by its significant one-year maximum drawdown of -35.38%, suggesting the stock is prone to substantial price declines during market downturns, representing a notable risk for volatility-averse investors.

Other Risks: The absence of significant short interest implies that bearish sentiment is currently low, which can be a positive indicator. However, this does not eliminate other company-specific or sector-related risks, such as dependence on consumer discretionary spending or competitive pressures within the apparel industry.