Levi Strauss’s share value jumped 4% at present following the discharge of the monetary report masking the second quarter of 2021, with the favored denim model reporting income and income that exceeded market estimates for the interval whereas administration additionally raised its steering for the third quarter of 2021.
Levi Strauss’ gross sales reached $ 1.3 billion within the three months ended Might 30, a 156% soar from a yr in the past, whereas the corporate topped $ 70 million l ‘consensus estimate for the quarter, in line with knowledge compiled by Looking for Alpha.
Gross margins stood at 58.8% for Levi, representing the best profitability ratio on report for the corporate. In the meantime, Levi elevated his dividend payout for the third quarter of the yr by 33% to $ 0.08.
Levi’s internet earnings ended the interval at $ 65 million, an enchancment of $ 429 million from a yr in the past, whereas adjusted diluted earnings per share reached $ 0.23, from minus 0 , $ 91 introduced by the corporate a yr in the past. Analysts anticipated Levi’s non-GAAP EPS to succeed in $ 0.09 per share for this quarter.
Are these outcomes constructive sufficient to justify shopping for Levi Strauss shares at its present value? The next article takes a more in-depth take a look at the technical setup of Levi Strauss’ shares and analyzes the basics of the corporate to supply a believable reply to this query.
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Levi Strauss share – technical evaluation
The Levi Strauss share value has been buying and selling in an ascending value channel since September of final yr, with the worth rising from $ 11.5 per share to $ 29 per share this morning.
This value channel was damaged twice and each resulted in failed breakouts, one on the upside (a bull lure) and the opposite on the draw back (a bear lure).
Nevertheless, this quarterly report reveals enhancing fundamentals and development prospects for the corporate, that means the inventory might proceed to soar due to the constructive momentum generated by this bullish report.
Based mostly on the continuation of the present pattern, it might be believable to count on the inventory value to proceed rising to as soon as once more hit the higher restrict of the worth channel at round $ 32 per share for a upside potential of 10.3%.
In the meantime, if fundamentals permit and market members are sufficiently enthusiastic about this quarter’s outcomes, a break above that threshold might set off a complete new bull cycle for Levi Strauss shares – a state of affairs that would drive the motion to point out new historic highs. within the following weeks.
Levi Strauss Inventory – Elementary Evaluation
TradingView knowledge reveals Levi Strauss’s gross sales had grown erratically earlier than the pandemic, rising 14% in 2018 whereas rising 4% in 2019. In the meantime, gross sales fell 23% final yr because the disaster viral has compelled the corporate to shut lots of its shops, with blue chip outcomes reaching $ 4.5 billion by the tip of 2020.
At present, administration has determined to boost its steering for the second quarter of the yr, now anticipating gross sales to leap 29% from the identical quarter a yr in the past whereas hitting round 5% in above the corporate’s 2019 determine.
Curiously, this quarter’s income was virtually the identical as Levi Strauss reported within the second quarter of 2019. Subsequently, for the total yr 2021, we’d count on a income improve of 5 at 10% of Levi’s gross sales from 2019, which might translate to a best-case state of affairs of $ 6.34 billion for Levi’s 2021 gross sales.
On the finish of this second quarter, Levi’s long-term debt stood at $ 2.1 billion whereas the corporate ended the interval with $ 1.31 billion in money and money equivalents. This interprets into internet debt of $ 800 million which interprets right into a internet debt to EBITDA ratio of 1.15 primarily based on an estimated EBITDA margin of 11% for this yr, in keeping with historic estimates.
In the meantime, with a market cap of $ 11.2 billion, Levi is valued at twice his anticipated gross sales for 2021, 16 occasions his EBITDA and 35 occasions his estimated EPS for 2021 primarily based on a internet margin of 5. %.
These multiples are a bit excessive contemplating that Levi Strauss will not present the form of backside line development one want to see for an organization valued at 35 occasions its anticipated backside line.
Subsequently, whereas the short-term outlook is bullish for Levi Strauss, the long-term outlook is just not that vibrant.