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What is not to like about such a strong and proud American brand like Harley-Davidson (HOG)? Since yearly lows, Harley's stock has come back to register a gain of 25% over the last six months. It currently trades at the upper end of its yearly range, at $52 per share. After such a good run, investors looking for a reason to worry should find comfort in the numbers under the hood of Harley's most recent 10-K.

Solid 2012 Results from Operations

Along with the upward movement of its stock price, Harley was able to increase revenue from motorcycle sales by 6%, from $4.662 billion to $4.942 billion, more than compensating its finance division's small decline. Total revenue for the two combined increased to $5.58 billion up from 2011's total revenue of $5.311 billion. This additional total revenue amounted to a 4% increase to the bottom line. Net income came in at $623.925 million, which represents 5% of its current market price and translates to a respectable 19.44 P/E.

From this bottom line, investors should be happy to hear that Harley was able to pay down its debt by approximately $620 million in addition to repurchasing $265.659 million in shares, net of those issued under its employee stock option plan. In 2013, the board has been authorized to repurchase 14.5 million additional shares which represents 6% of the 226.25 million of those currently outstanding.

This Story is about Market Share and Commitment to Quality

While every other motor vehicle company struggles for market share in an increasingly competitive environment. Harley's commitment to quality and its strong following make its dominance seem almost too easy.

On quality, nothing stands out more than the fact that Harley, as reported in its 10-K, has only experienced 12 recalls in the past 3 years amounting to $17.2 million in losses. This is almost nothing compared to the amount of money earned in those three years.

Through Harley's focus on promoting the company as a lifestyle company, and through interest generated from its Harley Tours Program, Harley has slowly gained market share in the U.S. while maintaining its position in Europe.

US Heavy Motorcycle Registration Data (from 10-K, in thousands of bikes)

Total Registered282271259.7
Registered Harley's161.3150.9142.7
Market Percentage57.2%55.7%54.9%
Year201220112010

European Heavy Motorcycle Registration Data (from 10-K, also in thousands)

Total Registered268.3292.5301.3
Registered Harley's35.64038
Market Percentage13.3%13.7%13%
Year201220112010

Along with continuing to grow its market share, the future looks great in the rest of the world with the highest growth in Latin America (up 39.2%) and the Middle East and Africa (up 19.9). With total U.S. sales accounting for approximately 64.8% of total sales, growth prospects from the rest of the world look to be where the most new money will come from.

On Valuation

1. Recently, HOG's share price appreciation prompted Goldman to downgrade the stock to neutral and set a price target for 2013 in the range of $54-58.

2. Insiders have net sales in the last six months of 242,165 shares, which may also be an indication that managers feel the stock is being fairly priced.

3. As indicated by the Goldman downgrade, Harley is being valued high based on its book value per share of 4.62.

4. Recent unemployment data has indicated that many Americans are still without jobs. This could challenge sales in the near term.

Other Positives to build on this year:

1. Just recently it was announced that the dividend would be increased from $0.155 to $0.21 per share. This represents a 35.48% increase.

2. Strong operating margin of 18.43% has built up cash for Harley. Cash as of December stood at $863 million (7% of market cap).

3. Consumers have built up savings, as indicated by the World Bank. Increased savings may prompt more future purchases from Harley fans.

4. The Motorcycle Industry Council reported increased sales in 2012, a trend that could be expected to continue in 2013.

Bottom Line:

Harley Davidson has been performing great over the last few years and management seems ready to reward shareholders through increased dividends and continued focus on the bottom line. While the stock looks fairly priced as of late, and any pullback from current levels would be a great buying opportunity.

Source: Hog Wild: A Look At Harley-Davidson's Recent Results