The Bull Rankings scorecard — our quality-growth score is 68.7 / 100, built from three pillars scored 0–100: Quality 74, Growth 72, Value 60 (valuation is judged against sector peers). At today's price, our reverse-DCF read says the market is implicitly betting on free-cash-flow growth of about 6% a year next year, fading to 3% a year by year ten — a gauge of how much optimism is already in the stock.
The thesis
Levi Strauss & Co. is a value play with solid quality. Our model gives it a 68.7/100 score, with Quality at 74, Growth at 72, and Value at 60. The strongest pillar—Quality—shows that the company’s earnings power and capital efficiency are healthy. The price, at $19.65, sits well below the 52‑week high of $25.7 and near the low of $17.72, while the PEG of 1.28 and a trailing P/E of 14 put the multiple slightly above the earnings growth analysts expect. The dividend‑raise signal shows the payout growing at a high‑single‑digit pace. In short, the stock sits on the cheap side of its peers, earns solid returns, and is paying out more each year.
What the business actually is
Levi Strauss & Co. sells denim and lifestyle apparel across four brands: Levi’s, Levi Strauss Signature, Denizen, and Beyond Yoga. The product mix ranges from jeans, casual and dress pants, to activewear, tops, shorts, skirts, dresses, jumpsuits, shirts, sweaters, jackets, footwear, and accessories. Distribution is dual‑channel: third‑party retailers (department stores, specialty retailers, e‑commerce sites, franchisees) and direct‑to‑consumer through company‑operated mainline and outlet stores, e‑commerce sites, and select shop‑in‑shops. The denim segment remains the revenue engine, while activewear and footwear are the fastest‑growing pockets.
Why it can (or can't) keep compounding
Levi’s profit margin of 9.7 % and ROE of 28.1 % signal that the company extracts strong value from its capital, though the debt‑to‑equity of 1.01 flatters that ROE. The brand equity of Levi’s, a household name in denim, creates a moat that competitors find hard to replicate; the brand’s heritage, global supply chain, and direct‑to‑consumer platform give it pricing power and customer loyalty. The dividend raise is the clearest signal that cash flow is robust enough to support higher payouts, reinforcing the quality narrative. Competitors lack the same scale of brand recognition and the integrated retail‑e‑commerce ecosystem that allows Levi’s to capture margins across the value chain.
The valuation question
The reverse‑DCF shows that today’s price implies free‑cash‑flow growth of about 6 % in year 1, tapering to 3 % by year 10. This starting rate is a touch below the trailing revenue growth of 7.3 % — close enough that our model reads the two as roughly in line. The P/E of 14 and PEG of 1.28 further confirm that the valuation is on the cheap side of sector peers. If the company can sustain its current revenue growth, the implied growth is conservative; if revenue slows, the price already reflects that pessimism. The valuation is therefore neutral: the price asks for roughly what the business is already delivering.
The bear case
The weakest pillar in our model is Value at 60. While not poor, it indicates that the stock is not the cheapest in the apparel sector. A debt‑to‑equity of 1.01 suggests leverage is higher than ideal for a consumer brand, and a beta of 1.31 means the stock is more volatile than the market. If the company’s free‑cash‑flow growth stalls below the implied 6 % in the first year, the valuation would become over‑priced. A concrete trigger would be a decline in free‑cash‑flow growth to < 4 % in the next quarter, confirming that even the modest implied path is too generous.
What would change our mind
- Free‑cash‑flow growth falling below 4 % in the next reporting period would signal that even this modest implied growth is out of reach.
- Debt‑to‑equity rising above 1.20 would raise concerns about leverage and financial flexibility, weakening the quality case.
- Profit margin slipping below 8 % would erode the company’s ability to sustain dividends and reinvest, undermining the moat argument.
If any of these thresholds are breached, the thesis would shift from a value‑quality play to a cautious stance.