Harley-Davidson, Inc. – Value Analysis (NYSE:HOG) : April 20, 2017

Capitalcube gives Harley-Davidson, Inc. a score of 66.

Our analysis is based on comparing Harley-Davidson, Inc. with the following peers – Polaris Industries Inc., Bayerische Motoren Werke Aktiengesellschaft Sponsored ADR and Honda Motor Co., Ltd. Sponsored ADR (PII-US, BMWYY-US and HMC-US).

Investment Outlook

Harley-Davidson, Inc. has a fundamental score of 66 and has a relative valuation of OVERVALUED.

Fundamental Score

Access our research and ratings on Harley-Davidson, Inc.

Company Overview

  • Compared to peers, relative outperformance over the last year has faded more recently.
  • It currently trades at a Price/Book ratio of (4.97).
  • HOG-US‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • HOG-US has relatively high profit margins while operating with median asset turns.
  • Changes in annual earnings (relative to peers) are better than the change in its revenues (relative to peers), implying the company is focused more on earnings.
  • HOG-US‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s relatively high gross and pre-tax margins suggest a differentiated product portfolio and tight control on operating costs relative to peers.
  • While HOG-US‘s revenues growth has been below the peer median in the last few years, the market still gives the stock a P/E ratio that is around peer median and seems to see the company as a long-term strategic bet.
  • The company’s level of capital investment is relatively low and suggests it is milking the business.
  • HOG-US might have enough interest coverage to take-on additional debt prudently.

Access our research and ratings on Harley-Davidson, Inc.

Leverage & Liquidity

HOG-US might have enough interest coverage to take-on additional debt.

  • While HOG-US‘s debt to enterprise ratio of 41.88% is on the high side compared to an overall benchmark of 25% (Note: The peer median is currently 51.80%), it also enjoys a relatively high interest coverage level of 23.67x which may give the company enough financial strength to support additional debt. Thus, the company is classified as having Some Capacity to raise more debt.
  • All 3 peers for the company have an outstanding debt balance.

HOG-US has maintained its Some Capacity profile from the recent year-end.

  • HOG-US‘s interest coverage is downward trending and is below (but within one standard deviation of) its five-year average interest coverage of 96.64x.
  • The decrease in its interest coverage to 23.67x from 35.17x (in 2016) was also accompanied by a decrease in its peer median during this period to 26.21x from 28.24x.
  • Interest coverage fell 9.47 points relative to peers (and is now lower than its peer median).
  • HOG-US‘s debt-EV is greater than (but within one standard deviation of) its five-year average debt-EV of 36.32%.
  • Compared to 2016, debt-EV has remained relatively stable for both the company (41.88%) and the peer median (51.80%).

Access the detailed analysis for Harley-Davidson, Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Polaris Industries Inc. 18.38 1.24 16.46 54.31
Bayerische Motoren Werke Aktiengesellschaft Sponsored ADR 67.99 0.98 28.74 2.13
Honda Motor Co., Ltd. Sponsored ADR 61.71 1.17 49.32 20.01
Harley-Davidson, Inc. 41.88 1.66 23.67 16.49
Peer Median 51.8 1.21 26.21 18.25
Best In Class 18.38 1.66 49.32 54.31

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Company Profile

Harley-Davidson, Inc. manufactures and sells heavyweight motorcycles as well as a line of motorcycle parts, accessories, general merchandise and related services. It also provides wholesale and retail financing and insurance programs primarily to Harley-Davidson dealers and customers. The company operates through the following segments: Motorcycles & Related Products and Financial Services. The Motorcycles & Related Products segment designs, manufactures and sells Harley-Davidson motorcycles as well as a line of motorcycle parts, accessories, general merchandise and related services. The Financial Services segment consists of Harley-Davidson Financial Services, which provides wholesale and retail financing and also offers insurance and insurance-related programs primarily to Harley-Davidson dealers and their retail customers. Harley-Davidson was founded by William Sylvester Harley, Arthur Davidson, Walter C. Davidson, Sr. and William A. Davidson in 1903 and is headquartered in Milwaukee, WI.

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