During Thursday’s extended trading session, Levi Strauss (LEVI) dropped their earnings report for the second quarter. And, while results did narrowly surpass the analyst estimates, they were weak. Shares of the stock are down more than 7% so far on Friday.

The company reported revenue that fell right in line with what experts were projecting – $1.34 billion on the nose. Meanwhile, earnings came in just over the expectation at 4 cents compared to 3 cents.

However, the issue is with profitability. Levi Strauss reported a net loss for the second quarter of $1.6 million. This time last year the company had a net income of $49.7 million and earnings of 12 cents/share.

Sales were down 9% for the quarter, and this has led to an adjusted outlook for the remainder of the year. The company cut its sales growth forecast to 1.5%-2.5% from a previous high of 3%. The new projection falls short of what analysts were projecting.

Much of the issue with Levi Strauss can be attributed to a slowdown in wholesale revenue. That figure is a key driver of growth within the company, and it fell 22% in the second quarter alone. This is attributed to a balance between slowing consumer demand and crucial items being out of stock.

Meanwhile, distribution centers are cluttered with slow-moving inventory – making it harder to fill orders and adding costs. This is a likely explanation for the drop in profitability.

While the market responded negatively to all this news, CEO Chip Bergh did his best to save face and dispel fears. He says that partway through the third quarter, US wholesale has already begun trending in the right direction. Inventory levels are improving, and he is confident the company will turn things around.

But, how soon? Is it worth waiting around and weathering the storm, or is this your sign to get out of LEVI? We’ve taken a look at the stock through the VectorVest stock analyzer and found 3 things to help you make a more confident decision.

LEVI Has Fair Upside Potential With Poor Safety and Timing Right Now

The VectorVest system helps you find winning opportunities on autopilot while managing your portfolio with ease. It tells you what to buy, when to buy, and when to sell - all in just 3 simple ratings.

These are relative value (RV), relative safety (RS), and relative timing (RT). Each of these sits on its own scale of 0.00-2.00, with 1.00 being the average for quick and easy interpretation.

But it gets even better. Because based on the overall VST rating for a given stock, the system issues a clear buy, sell, or hold recommendation at any given time. Unfortunately for LEVI, the situation is pretty bleak right now from a stock analysis standpoint:

  • Fair Upside Potential: The RV rating offers far better insight than a simple comparison of price to value alone. Instead, it compares a stock's 3-year price appreciation potential to AAA corporate bond rates and risk, painting a more detailed picture for investors. And right now, the RV rating of 0.87 is a ways below the average - but deemed fair nonetheless. That being said, the stock is fully valued at its current price.
  • Poor Safety: The RS rating is an indicator of risk. It’s derived through an analysis of a company’s financial consistency & predictability, debt-to-equity ratio, and business longevity. As for LEVI, the RS rating of 0.63 is poor.
  • Poor Timing: As you can see from the recent price trend for LEVI, it has poor timing right now as well - and the RT rating of 0.73 confirms this. This rating is based on the direction, dynamics, and magnitude of the stock’s price movement. It’s calculated day over day, week over week, quarter over quarter, and year over year.

In the end, LEVI has a poor overall VST rating of 0.74. So, does this signal that it's time to cut ties and sell any shares you have of LEVI? Is there any reason to hold out and wait for the light at the end of the tunnel? Should you buy shares at a discount after the 7% stepback this week?

Don’t play the guessing game or let emotion cloud your judgment. A clear buy, sell, or hold recommendation awaits you at VectorVest. Get a free stock analysis today and make your next move with confidence and clarity!

Levi Strauss (LEVI) stock analysis chart by VectorVest Mobile

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VectorVest advocates buying safe, undervalued stocks, rising in price. As for LEVI, the stock has fair upside potential - albeit below average. The real issue, though, is the poor safety and poor timing holding this stock back right now.

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