Four wheels move the body. Two wheels move the soul.
~Author Unknown
There are many Harley Davidson (HOG) enthusiasts throughout the world today. Many of them are enthusiasts for the sake of owning and riding the company's American made motorcycles. Savvy investors have discovered how this $11.22 billion large-cap company can be a profitable addition to their portfolios. The thrill of investing can be just as exhilarating as the thrill of riding.
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Harley now has 57% market share in the United States. Exciting new motorcycles such as the Seventy-Two and the Softail Slim offer riders more options. The Seventy-Two appeals to chopper enthusiasts, while the Softail Slim offers a personalized fit through a variety of accessories. Harley's Superlow model has found a niche among female riders. The Forty-Eight is another popular model that many riders have embraced.
Currently, Harley Davidson is fairly valued on the low end with a forward PE ratio of 13.69, a PEG ratio of 1.21, and a price to book ratio of 4.4. The stock has pulled back from its 52 week high of $54 and is now trading at about $49.
Harley's financial statistics are as nice looking as its bikes. Harley has a double digit profit margin of 11.82% and an operating margin of 17.56%. The company has operating cash flow of $916 million and earnings per share of $2.78. It also has 1.75 times more current assets than current liabilities, so it can handle its short-term debt like an experienced rider handles his Hog.
Harley has exceeded earnings estimates in its last four quarters. The company is expected to grow earnings annually at 14.4% for the next five years. This is higher than the expected earnings of the average S&P 500 company of about 10.5%.
The company pays a modest dividend of 1.3%. If dividends are reinvested, a total CAGR of 15.7% can be achieved. The company's growth plus dividends should allow a $1000 investment to more than double to be worth about $2070 in five years.
Harley Davidson's growth is being experienced domestically and internationally. Here are some Q1 2012 highlights:
- U.S. sales increased 25.5%
- European sales increased 1.4% in a challenging economic environment
- Latin American sales increased 85% with strong performance in Brazil
- Asia-Pacific sales increased 25.4%
- Canada sales increased 1.5%
The company envisions international expansion as a core area of future growth. Harley set a goal of opening 100 - 150 new international dealerships between 2009 and 2014. Since 2009, Harley has opened 67 new international dealerships with about two-thirds in emerging markets. This continued growth should allow Harley to meet or exceed its earnings estimates and continue to reward shareholders.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
