Levi Strauss & Co [NYSE: LEVI] hasn’t been performing so well ever since it went public close to a month ago. In spite of this, analysts are largely bullish on this stock. In April, Morgan Stanley initiated the upgrade of Levi to equal weight. Guggenheim also initiated an upgrade of this stock to buy. Others like Telsey Advisory group are more ambitious and initiated an upgrade of this stock to outperform. This stock also has a rating of 2.1, which means that the overall consensus is buy. So what are the fundamentals that are giving this stock such a positive reception from financial analysts?
Well, one of the key factors that determines a stock’s health is its revenues. This company has revenues of $5.67 billion, and a net income of $447.73 million. This means that, unlike other IPO stocks that are still in losses, Levi is making money, and has a clear revenue path. But overall revenues just tell a part of the story, there is also the issue of growth. Valuable stocks usually have growing revenues. This is usually a good measure of product demand. On this front, Levi is doing quite well. As of its last reports, the company had a quarterly revenue growth (yoy) of 6.80%.
Another factor that acts as a good barometer to company health is its debt position. From its books, Levi is in a very healthy debt management strategy. The company has a current ratio of 2.03. A current ratio above 1 usually indicates strong debt management strategies. As such, with a current ratio of 2.03, Levi is quite a healthy company. This current ratio means that the company is sufficiently covered even in an environment of rising interest rates. It can comfortably repay its debts and continue its operations.
Still on the ability to continue operations is the aspect of being able to cover every day operational costs with ease. The best metric for this is the operating cash flow. On this front, Levi is in the clear. The company has a positive operating cash flow of $410.02 million. On top of that, the company has a levered free cash flow of $318.82 million. Essentially this means that, the company meets all its operational issues, and still has $318.72 million left to spare. This means that the company is well positioned to invest in any emergent opportunities that may arise in the market.
Another fundamental aspect to Levi is its strong brand equity. The company has been in business for over 100 years, and has become synonymous with the blue jeans. This is a huge component to its value, and as the company continues to reinvent itself to fit emerging trends, its market position is likely to keep growing.
With all these factors at play, it’s not hard to see why analysts are super bullish on Levi. The stock may not be performing well, but these are volatile times in the stock markets. That’s due to the trade war, and weakening of the global markets.