May 28, 2024
Investors

Investors Interested In Levi Strauss & Co.’s (NYSE:LEVI) Earnings


Levi Strauss & Co.’s (NYSE:LEVI) price-to-earnings (or “P/E”) ratio of 23.9x might make it look like a sell right now compared to the market in the United States, where around half of the companies have P/E ratios below 16x and even P/E’s below 9x are quite common. Nonetheless, we’d need to dig a little deeper to determine if there is a rational basis for the elevated P/E.

Levi Strauss hasn’t been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. It might be that many expect the dour earnings performance to recover substantially, which has kept the P/E from collapsing. If not, then existing shareholders may be extremely nervous about the viability of the share price.

View our latest analysis for Levi Strauss

NYSE:LEVI Price to Earnings Ratio vs Industry December 23rd 2023

Keen to find out how analysts think Levi Strauss’ future stacks up against the industry? In that case, our free report is a great place to start.

Is There Enough Growth For Levi Strauss?

There’s an inherent assumption that a company should outperform the market for P/E ratios like Levi Strauss’ to be considered reasonable.

Taking a look back first, the company’s earnings per share growth last year wasn’t something to get excited about as it posted a disappointing decline of 52%. This has erased any of its gains during the last three years, with practically no change in EPS being achieved in total. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 34% each year as estimated by the analysts watching the company. Meanwhile, the rest of the market is forecast to only expand by 13% each year, which is noticeably less attractive.

In light of this, it’s understandable that Levi Strauss’ P/E sits above the majority of other companies. Apparently shareholders aren’t keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Levi Strauss’ P/E?

It’s argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Levi Strauss’ analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren’t under threat. It’s hard to see the share price falling strongly in the near future under these circumstances.

It is also worth noting that we have found 4 warning signs for Levi Strauss that you need to take into consideration.

It’s important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

Valuation is complex, but we’re helping make it simple.

Find out whether Levi Strauss is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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.



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