Levi Strauss (NYSE:LEVI) adds US$361m to market cap in the past 7 days, though investors from a year ago are still down 31%

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. Investors in Levi Strauss & Co. (NYSE:LEVI) have tasted that bitter downside in the last year, as the share price dropped 32%. That contrasts poorly with the market return of 2.1%. At least the damage isn't so bad if you look at the last three years, since the stock is down 11% in that time. Furthermore, it's down 11% in about a quarter. That's not much fun for holders. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

The recent uptick of 4.9% could be a positive sign of things to come, so let's take a lot at historical fundamentals.

See our latest analysis for Levi Strauss

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the last year Levi Strauss grew its earnings per share, moving from a loss to a profit.

Earnings per share growth rates aren't particularly useful for comparing with the share price, when a company has moved from loss to profit. But we may find different metrics more enlightening.

Levi Strauss' revenue is actually up 42% over the last year. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Levi Strauss is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling Levi Strauss stock, you should check out this free report showing analyst consensus estimates for future profits.

A Different Perspective

Over the last year, Levi Strauss shareholders took a loss of 31%, including dividends. In contrast the market gained about 2.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The three-year loss of 2.7% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Levi Strauss you should know about.

Of course Levi Strauss may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.