Harley-Davidson Inc Valuation – April 2019 #HOG

Company Profile (excerpt from Reuters): Harley-Davidson, Inc., incorporated on March 8, 1991, is the parent company for the groups of companies doing business as Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS). The Company operates in two segments: the Motorcycles & Related Products (Motorcycles) and the Financial Services.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HOG – April 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $5,914,027,961 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.25 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 53.65% Pass
6. Moderate PEmg Ratio PEmg < 20 11.78 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.42 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.25 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.51 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.16
MG Growth Estimate -1.28%
MG Value $18.74
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $45.79
MG Value based on 0% Growth $26.84
Market Implied Growth Rate 1.64%
Current Price $37.19
% of Intrinsic Value 198.44%

Harley-Davidson Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.45 in 2015 to an estimated $3.16 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 1.64% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Harley-Davidson Inc revealed the company was trading above its Graham Number of $26.38. The company pays a dividend of $1.48 per share, for a yield of 4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.78, which was below the industry average of 22.44, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-27.04.

Harley-Davidson Inc performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$27.04
Graham Number $26.38
PEmg 11.78
Current Ratio 1.25
PB Ratio 3.42
Current Dividend $1.48
Dividend Yield 3.98%
Number of Consecutive Years of Dividend Growth 8

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $4,484,442,000
Total Current Liabilities $3,597,600,000
Long-Term Debt $4,887,667,000
Total Assets $10,665,664,000
Intangible Assets $61,046,000
Total Liabilities $8,891,715,000
Shares Outstanding (Diluted Average) 162,973,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.84
Dec2018 $3.19
Dec2017 $3.02
Dec2016 $3.83
Dec2015 $3.69
Dec2014 $3.88
Dec2013 $3.28
Dec2012 $2.72
Dec2011 $2.55
Dec2010 $0.62
Dec2009 -$0.24
Dec2008 $2.79
Dec2007 $3.74
Dec2006 $3.93
Dec2005 $3.41
Dec2004 $3.00
Dec2003 $2.50
Dec2002 $1.90
Dec2001 $1.43
Dec2000 $1.13
Dec1999 $0.86

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.16
Dec2018 $3.39
Dec2017 $3.50
Dec2016 $3.66
Dec2015 $3.45
Dec2014 $3.09
Dec2013 $2.40
Dec2012 $1.86
Dec2011 $1.59
Dec2010 $1.46
Dec2009 $2.16
Dec2008 $3.37
Dec2007 $3.54
Dec2006 $3.28
Dec2005 $2.79
Dec2004 $2.31
Dec2003 $1.83

Recommended Reading:

Other ModernGraham posts about the company

Harley-Davidson Inc Valuation – June 2018 $HOG
Harley-Davidson Inc Valuation – August 2017 $HOG
12 Best Stocks For Value Investors This Week – 7/1/16
Harley-Davidson Inc Valuation – June 2016 $HOG
19 Best Stocks For Value Investors This Week – 1/9/16

Other ModernGraham posts about related companies

LKQ Corp Valuation – March 2019 #LKQ
Aptiv PLC Valuation – March 2019 #APTV
Paccar Inc Valuation – March 2019 #PCAR
BorgWarner Inc Valuation – February 2019 $BWA
CarMax Inc Valuation – February 2019 $KMX
Ford Motor Co Valuation – February 2019 $F
General Motors Co Valuation – February 2019 $GM
O’Reilly Automotive Inc Valuation – February 2019 $ORLY
Goodyear Tire & Rubber Co Valuation – January 2019 $GT
Genuine Parts Co Valuation – January 2019 $GPC

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Harley-Davidson Inc Valuation – June 2018 $HOG

Company Profile (excerpt from Reuters): Harley-Davidson, Inc., incorporated on March 8, 1991, is the parent company for the groups of companies doing business as Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS). The Company operates in two segments: the Motorcycles & Related Products (Motorcycles) and the Financial Services.

HOG Chart

HOG data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HOG – June 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $6,918,441,728 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.11 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 247.78% Pass
6. Moderate PEmg Ratio PEmg < 20 12.20 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.55 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.11 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 9.67 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.44
MG Growth Estimate 1.66%
MG Value $40.59
Opinion Fairly Valued
MG Grade C-
MG Value based on 3% Growth $49.81
MG Value based on 0% Growth $29.20
Market Implied Growth Rate 1.85%
Current Price $41.90
% of Intrinsic Value 103.22%

Harley-Davidson Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $3.09 in 2014 to an estimated $3.44 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 1.85% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Harley-Davidson Inc revealed the company was trading above its Graham Number of $28.71. The company pays a dividend of $1.46 per share, for a yield of 3.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.2, which was below the industry average of 17.9, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-24.01.

Harley-Davidson Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$24.01
Graham Number $28.71
PEmg 12.20
Current Ratio 1.11
PB Ratio 3.55
Current Dividend $1.46
Dividend Yield 3.48%
Number of Consecutive Years of Dividend Growth 7

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $4,220,154,000
Total Current Liabilities $3,795,103,000
Long-Term Debt $4,108,511,000
Total Assets $10,277,621,000
Intangible Assets $56,524,000
Total Liabilities $8,281,672,000
Shares Outstanding (Diluted Average) 169,174,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.34
Dec2017 $3.02
Dec2016 $3.83
Dec2015 $3.69
Dec2014 $3.88
Dec2013 $3.28
Dec2012 $2.72
Dec2011 $2.55
Dec2010 $0.62
Dec2009 -$0.24
Dec2008 $2.79
Dec2007 $3.74
Dec2006 $3.93
Dec2005 $3.41
Dec2004 $3.00
Dec2003 $2.50
Dec2002 $1.90
Dec2001 $1.43
Dec2000 $1.13
Dec1999 $0.86
Dec1998 $0.69

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.44
Dec2017 $3.50
Dec2016 $3.66
Dec2015 $3.45
Dec2014 $3.09
Dec2013 $2.40
Dec2012 $1.86
Dec2011 $1.59
Dec2010 $1.46
Dec2009 $2.16
Dec2008 $3.37
Dec2007 $3.54
Dec2006 $3.28
Dec2005 $2.79
Dec2004 $2.31
Dec2003 $1.83
Dec2002 $1.40

Recommended Reading:

Other ModernGraham posts about the company

Harley-Davidson Inc Valuation – August 2017 $HOG
12 Best Stocks For Value Investors This Week – 7/1/16
Harley-Davidson Inc Valuation – June 2016 $HOG
19 Best Stocks For Value Investors This Week – 1/9/16
Harley-Davidson Inc Valuation – January 2016 Update $HOG

Other ModernGraham posts about related companies

LKQ Corporation – June 2018 $LKQ
Aptiv PLC Valuation – Initial Coverage May 2018 $APTV
BorgWarner Inc Valuation – April 2018 $BWA
CarMax Inc Valuation – April 2018 $KMX
Ford Motor Company Valuation – April 2018 $F
General Motors Co Valuation – April 2018 $GM
O’Reilly Automotive Inc Valuation – April 2018 $ORLY
Goodyear Tire & Rubber Co Valuation – March 2018 $GT
Genuine Parts Co Valuation – March 2018 $GPC
AutoZone Inc Valuation – February 2018 $AZO

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Harley-Davidson Inc Valuation – August 2017 $HOG

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Undervalued Stocks for the Enterprising Investor – August 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Harley-Davidson Inc (HOG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Harley-Davidson, Inc. is the parent company for the groups of companies doing business as Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS). The Company operates in two segments: the Motorcycles & Related Products (Motorcycles) and the Financial Services. The Motorcycles segment consists of HDMC, which designs, manufactures and sells at wholesale on-road Harley-Davidson motorcycles, as well as motorcycle parts, accessories, general merchandise and related services. The Company manufactures and sells at wholesale cruiser and touring motorcycles. The Financial Services segment consists of HDFS, which provides wholesale and retail financing and insurance-related programs to the Harley-Davidson dealers and their retail customers. HDFS is engaged in the business of financing and servicing wholesale inventory receivables and retail consumer loans for the purchase of Harley-Davidson motorcycles.

HOG Chart

HOG data by YCharts

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Downloadable PDF version of this valuation:

ModernGraham Valuation of HOG – August 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $8,183,423,170 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.27 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 249.84% Pass
6. Moderate PEmg Ratio PEmg < 20 13.02 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.11 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.27 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.26 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $3.69
MG Growth Estimate 8.08%
MG Value $90.87
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $53.44
MG Value based on 0% Growth $31.33
Market Implied Growth Rate 2.26%
Current Price $47.97
% of Intrinsic Value 52.79%

Harley-Davidson Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor.  The Defensive Investor is concerned with the  low current ratio, insufficient earnings stability over the last ten years, and the high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets.  As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.4 in 2013 to an estimated $3.69 for 2017.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.26% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Harley-Davidson Inc revealed the company was trading above its Graham Number of $29.61.  The company pays a dividend of $1.4 per share, for a yield of 2.9%, putting it among the best dividend paying stocks today.  Its PEmg (price over earnings per share – ModernGraham) was 13.02, which was below the industry average of 18.18, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  Finally, the company was trading above its Net Current Asset Value (NCAV) of $-23.94.

Harley-Davidson Inc receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$23.94
Graham Number $29.61
PEmg 13.02
Current Ratio 1.27
PB Ratio 4.11
Current Dividend $1.40
Dividend Yield 2.92%
Number of Consecutive Years of Dividend Growth 6

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2017
Total Current Assets $4,244,602,000
Total Current Liabilities $3,354,761,000
Long-Term Debt $4,678,350,000
Total Assets $10,487,771,000
Intangible Assets $54,630,000
Total Liabilities $8,441,604,000
Shares Outstanding (Diluted Average) 175,324,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.57
Dec2016 $3.83
Dec2015 $3.69
Dec2014 $3.88
Dec2013 $3.28
Dec2012 $2.72
Dec2011 $2.55
Dec2010 $0.62
Dec2009 -$0.24
Dec2008 $2.79
Dec2007 $3.74
Dec2006 $3.93
Dec2005 $3.41
Dec2004 $3.00
Dec2003 $2.50
Dec2002 $1.90
Dec2001 $1.43
Dec2000 $1.13
Dec1999 $0.86
Dec1998 $0.69
Dec1997 $0.57

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.69
Dec2016 $3.66
Dec2015 $3.45
Dec2014 $3.09
Dec2013 $2.40
Dec2012 $1.86
Dec2011 $1.59
Dec2010 $1.46
Dec2009 $2.16
Dec2008 $3.37
Dec2007 $3.54
Dec2006 $3.28
Dec2005 $2.79
Dec2004 $2.31
Dec2003 $1.83
Dec2002 $1.40
Dec2001 $1.08

Recommended Reading:

Other ModernGraham posts about the company

19 Best Stocks For Value Investors This Week – 1/9/16
Harley-Davidson Inc Valuation – January 2016 Update $HOG
The Best Companies of the Auto Industry – October 2015
5 Undervalued Companies for Enterprising Investors Near 52 Week Lows – October 2015
13 Best Stocks For Value Investors This Week – 10/3/15

Other ModernGraham posts about related companies

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Monro Muffler Brake Inc Valuation – Initial Coverage $MNRO
Group 1 Automotive Inc Valuation – Initial Coverage $GPI
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Linamar Corp Valuation – Initial Coverage $TSE:LNR
AutoNation Inc Valuation – March 2017 $AN
Superior Industries International Inc Valuation – Initial Coverage $SUP
Canadian Tire Corp Limited Valuation – Initial Coverage $TSE:CTC.A
LKQ Corporation Valuation – Initial Coverage $LKQ
Lithia Motors Inc Valuation – Initial Coverage $LAD

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Harley-Davidson Inc Valuation – June 2016 $HOG

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – June 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Harley-Davidson Inc (HOG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Harley-Davidson, Inc. is the parent company for the groups of companies doing business as Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS). The Company operates in two segments: the Motorcycles & Related Products (Motorcycles) and the Financial Services. The Motorcycles segment consists of HDMC, which designs, manufactures and sells at wholesale on-road l Harley-Davidson motorcycles, as well as a line of motorcycle parts, accessories, general merchandise and related services. The Company offers its products to retail customers through a network of independent dealers. The Company operates across the world, including the Americas, Europe/Middle East/Africa (EMEA) and Asia-Pacific. The Financial Services segment consists of HDFS, which provides wholesale and retail financing and insurance, and insurance-related programs to the Harley-Davidson dealers and their retail customers. HDFS conducts business in the United States and Canada.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of HOG – June 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $7,134,178,102 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.74 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 78.89% Pass
6. Moderate PEmg Ratio PEmg < 20 11.76 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.13 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.74 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.87 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

HOG value chart June 2016

EPSmg $3.61
MG Growth Estimate 14.01%
MG Value $131.68
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $52.29
MG Value based on 0% Growth $30.65
Market Implied Growth Rate 1.63%
Current Price $42.39
% of Intrinsic Value 32.19%

Harley-Davidson Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.86 in 2012 to an estimated $3.61 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.63% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

Harley-Davidson Inc performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

HOG charts June 2016

Net Current Asset Value (NCAV) -$22.17
Graham Number $29.43
PEmg 11.76
Current Ratio 1.74
PB Ratio 4.13
Current Dividend $1.28
Dividend Yield 3.02%
Number of Consecutive Years of Dividend Growth 6

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $4,491,750,000
Total Current Liabilities $2,588,006,000
Long-Term Debt $5,460,553,000
Total Assets $10,467,671,000
Intangible Assets $54,585,000
Total Liabilities $8,574,851,000
Shares Outstanding (Diluted Average) 184,204,000

Earnings Per Share History

Next Fiscal Year Estimate $3.68
Dec2015 $3.69
Dec2014 $3.88
Dec2013 $3.28
Dec2012 $2.72
Dec2011 $2.55
Dec2010 $0.62
Dec2009 -$0.24
Dec2008 $2.79
Dec2007 $3.74
Dec2006 $3.93
Dec2005 $3.41
Dec2004 $3.00
Dec2003 $2.50
Dec2002 $1.90
Dec2001 $1.43
Dec2000 $1.13
Dec1999 $0.87
Dec1998 $0.69
Dec1997 $0.57
Dec1996 $0.55

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.61
Dec2015 $3.45
Dec2014 $3.09
Dec2013 $2.40
Dec2012 $1.86
Dec2011 $1.59
Dec2010 $1.46
Dec2009 $2.16
Dec2008 $3.37
Dec2007 $3.54
Dec2006 $3.28
Dec2005 $2.79
Dec2004 $2.31
Dec2003 $1.83
Dec2002 $1.40
Dec2001 $1.08
Dec2000 $0.86

Recommended Reading:

Other ModernGraham posts about the company

19 Best Stocks For Value Investors This Week – 1/9/16
Harley-Davidson Inc Valuation – January 2016 Update $HOG
The Best Companies of the Auto Industry – October 2015
5 Undervalued Companies for Enterprising Investors Near 52 Week Lows – October 2015
13 Best Stocks For Value Investors This Week – 10/3/15

Other ModernGraham posts about related companies

Autozone Inc Valuation – June 2016 $AZO
BorgWarner Inc Valuation – February 2016 Update $BWA
Genuine Parts Co Valuation – January 2016 Update $GPC
Ford Motor Company Valuation – January 2016 Update $F
Genuine Parts Co Valuation – January 2016 Update $GPC
Ford Motor Company Valuation – January 2016 Update $F
Harley-Davidson Inc Valuation – January 2016 Update $HOG
AutoNation Inc Valuation – November 2015 Update $AN
BorgWarner Inc. Valuation – November 2015 Update $BWA
The Best Companies of the Auto Industry – October 2015

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Harley-Davidson Inc Valuation – January 2016 Update $HOG

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – November 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Harley-Davidson Inc (HOG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Harley-Davidson, Inc. is the parent company for the groups of companies doing business as Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS). The Company operates in two segments: the Motorcycles & Related Products (Motorcycles) segment and the Financial Services segment. The Motorcycles segment consists of HDMC, which designs, manufactures and sells street-legal Harley-Davidson motorcycles, as well as a line of motorcycle parts, accessories, general merchandise and related services. The Company’s products are sold to retail customers through a network of independent dealers. The Financial Services segment consists of HDFS, which provides wholesale and retail financing, and insurance and insurance-related programs to Harley-Davidson dealers and their retail customers. The Company conducts its business around the world, including in North America, Europe, the Middle East and Africa (EMEA); Asia-Pacific, and Latin America.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of HOG – January 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $8,741,204,474 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.73 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 2.29% Fail
6. Moderate PEmg Ratio PEmg < 20 13.36 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.63 Pass
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.73 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.59 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

HOG value Chart January 2016

EPSmg $3.40
MG Growth Estimate 15.00%
MG Value $131.03
Opinion Undervalued
MG Value based on 3% Growth $49.35
MG Value based on 0% Growth $28.93
Market Implied Growth Rate 2.43%
Current Price $45.48
% of Intrinsic Value 34.71%

Harley Davidson Inc qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, and the insufficient earnings stability or growth over the last ten years.  The Enterprising Investor is only initially concerned by the level of debt relative to the net current assets . As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.59 in 2011 to an estimated $3.40 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.43% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Harley Davidson Inc (HOG)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

HOG Charts January 2016

Net Current Asset Value (NCAV) -$17.38
Graham Number $32.60
PEmg 13.36
Current Ratio 1.73
PB Ratio 3.63
Dividend Yield 2.65%
Number of Consecutive Years of Dividend Growth 5

 

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information Sep15
Total Current Assets $4,616,041,000
Total Current Liabilities $2,663,005,000
Long-Term Debt $5,054,347,000
Total Assets $10,731,560,000
Intangible Assets $54,267,000
Total Liabilities $8,171,885,000
Shares Outstanding (Diluted Average) 204,580,000

Earnings Per Share History

Next Fiscal Year Estimate $3.54
Dec14 $3.88
Dec13 $3.28
Dec12 $2.72
Dec11 $2.55
Dec10 $0.62
Dec09 -$0.24
Dec08 $2.79
Dec07 $3.74
Dec06 $3.93
Dec05 $3.41
Dec04 $3.00
Dec03 $2.50
Dec02 $1.90
Dec01 $1.43
Dec00 $1.13
Dec99 $0.86
Dec98 $0.69
Dec97 $0.57
Dec96 $0.55
Dec95 $0.38

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.40
Dec14 $3.09
Dec13 $2.40
Dec12 $1.86
Dec11 $1.59
Dec10 $1.46
Dec09 $2.16
Dec08 $3.37
Dec07 $3.54
Dec06 $3.28
Dec05 $2.79
Dec04 $2.31
Dec03 $1.83
Dec02 $1.40
Dec01 $1.08
Dec00 $0.86
Dec99 $0.68

Recommended Reading:

Other ModernGraham posts about the company

The Best Companies of the Auto Industry – October 2015
5 Undervalued Companies for Enterprising Investors Near 52 Week Lows – October 2015
13 Best Stocks For Value Investors This Week – 10/3/15
Harley-Davidson Inc. Analysis – October 2015 Update $HOG
Harley Davidson Analysis – June 2015 Update $HOG

Other ModernGraham posts about related companies

AutoNation Inc Valuation – November 2015 Update $AN
BorgWarner Inc. Valuation – November 2015 Update $BWA
The Best Companies of the Auto Industry – October 2015
Harley-Davidson Inc. Analysis – October 2015 Update $HOG
Harman International Industries Analysis – September 2015 Update $HAR
Genuine Parts Company Analysis – September 2015 Update $GPC
Ford Motor Company Analysis – August 2015 Update $F
Advance Auto Parts Inc. Analysis – Initial Coverage $AAP
General Motors Company Analysis – 2015 Update $GM
BorgWarner Inc. Analysis – July 2015 Update $BWA

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Harley-Davidson Inc. Analysis – October 2015 Update $HOG

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – September 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Harley-Davidson Inc. (HOG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Harley-Davidson, Inc. is the parent company for the groups of companies doing business as Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS). The Company operates in two segments: the Motorcycles & Related Products (Motorcycles) segment and the Financial Services segment. The Motorcycles segment consists of HDMC, which designs, manufactures and sells street-legal Harley-Davidson motorcycles, as well as a line of motorcycle parts, accessories, general merchandise and related services. The Company’s products are sold to retail customers through a network of independent dealers. The Financial Services segment consists of HDFS, which provides wholesale and retail financing, and insurance and insurance-related programs to Harley-Davidson dealers and their retail customers. The Company conducts its business around the world, including in North America, Europe, the Middle East and Africa (EMEA); Asia-Pacific, and Latin America.

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
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Downloadable PDF version of this valuation:

ModernGraham Valuation of HOG – October 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $10,969,694,732 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.86 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 4.78% Fail
6. Moderate PEmg Ratio PEmg < 20 15.44 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.72 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.86 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.10 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

HOG value Chart October 2015

EPSmg $3.49
MG Growth Estimate 15.00%
MG Value $134.37
Opinion Undervalued
MG Value based on 3% Growth $50.61
MG Value based on 0% Growth $29.67
Market Implied Growth Rate 3.47%
Current Price $53.87
% of Intrinsic Value 40.09%

Harley-Davidson Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, the low current ratio, and the high PB ratio.  The Enterprising Investor is only initially concerned by the level of debt relative to the net current assets.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.59 in 2011 to an estimated $3.49 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.47% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Harley-Davidson Inc. (HOG)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

HOG Charts October 2015

Net Current Asset Value (NCAV) -$13.64
Graham Number $35.25
PEmg 15.44
Current Ratio 1.86
PB Ratio 3.72
Dividend Yield 2.17%
Number of Consecutive Years of Dividend Growth 5

 

[/level-mg-stocks-screens-subscriber]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $4,696,390,000
Total Current Liabilities $2,522,724,000
Long-Term Debt $4,560,349,000
Total Assets $10,564,870,000
Intangible Assets $26,105,000
Total Liabilities $7,541,245,000
Shares Outstanding (Diluted Average) 208,590,000

Earnings Per Share History

Next Fiscal Year Estimate $3.80
Dec14 $3.88
Dec13 $3.28
Dec12 $2.72
Dec11 $2.55
Dec10 $0.62
Dec09 -$0.24
Dec08 $2.79
Dec07 $3.74
Dec06 $3.93
Dec05 $3.41
Dec04 $3.00
Dec03 $2.50
Dec02 $1.90
Dec01 $1.43
Dec00 $1.13
Dec99 $0.87
Dec98 $0.69
Dec97 $0.57
Dec96 $0.55
Dec95 $0.38

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.49
Dec14 $3.09
Dec13 $2.40
Dec12 $1.86
Dec11 $1.59
Dec10 $1.46
Dec09 $2.16
Dec08 $3.37
Dec07 $3.54
Dec06 $3.28
Dec05 $2.79
Dec04 $2.31
Dec03 $1.83
Dec02 $1.40
Dec01 $1.08
Dec00 $0.86
Dec99 $0.68

Recommended Reading:

Other ModernGraham posts about the company

Harley Davidson Analysis – June 2015 Update $HOG
5 Undervalued Companies for Enterprising Investors Near 52 Week Lows – June 2015
24 Companies in the Spotlight This Week – 3/28/15
Harley-Davidson Inc. Quarterly Valuation – March 2015 $HOG
15 Companies in the Spotlight This Week – 12/27/14

Other ModernGraham posts about related companies

Harman International Industries Analysis – September 2015 Update $HAR
Genuine Parts Company Analysis – September 2015 Update $GPC
Ford Motor Company Analysis – August 2015 Update $F
Advance Auto Parts Inc. Analysis – Initial Coverage $AAP
General Motors Company Analysis – 2015 Update $GM
BorgWarner Inc. Analysis – July 2015 Update $BWA
Paccar Inc. Analysis – July 2015 Update $PCAR
Harley Davidson Analysis – June 2015 Update $HOG
Delphi Automotive Analysis – 2015 Update $DLPH
Genuine Parts Company Analysis – June 2015 Quarterly Update $GPC

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Harley Davidson Analysis – June 2015 Update $HOG

186px-Harley-Davidson.svg

Harley Davidson passes the initial requirements of the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth or stability over the last ten years, and the high PB ratio. The Enterprising Investor’s only concern is the level of debt relative to the net current assets. As a result, all Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, it has grown its EPSmg (normalized earnings) from $1.59 in 2011 to an estimated $3.44 for 2015. This level of demonstrated growth does not support the market’s implied estimate for annual earnings growth of 4.1% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged around 23.25% annually, but the ModernGraham valuation model reduces the actual growth to a more conservative figure when making an estimate, and returns an estimate of intrinsic value well below the current price, indicating that Harley Davidson is overvalued at the present time.

Read the full valuation on Guru Focus!


Disclaimer: The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours. Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Harley-Davidson Inc. Quarterly Valuation – March 2015 $HOG

186px-Harley-Davidson.svg

Harley-Davidson qualifies for the Enterprising Investor, but not the Defensive Investor, who is concerned with the low current ratio, insufficient earnings growth or stability over the last ten years, and the high PB ratio. The Enterprising Investor, on the other hand, is only initially concerned with the level of debt relative to the net current assets. As a result, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $1.46 in 2010 to $3.09 for 2014. This is a strong level of demonstrated growth, which is well above the market’s implied estimate for earnings growth of only 5.73% annually over the next 7-10 years. In fact, the historical growth is around 22% per year, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still returns an estimate of intrinsic value falling above the current price, indicating the company is undervalued at the present time.

Be sure to check out previous ModernGraham valuations of Harley-Davidson Inc. (HOG) for a greater perspective!

Read the full valuation on Seeking Alpha!

HOG Chart

HOG data by YCharts

Disclaimer: The author did not hold a position in Harley-Davidson Inc. (HOG) at the time of publication and had no intention of changing that position within the next 72 hours. Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Harley Davidson Inc. Quarterly Valuation – December 2014 $HOG

186px-Harley-Davidson.svg

Harley Davidson fares quite well in the ModernGraham model, and is suitable for Enterprising Investors. The Defensive Investor is concerned with the low current ratio, insufficient earnings growth or stability over the last ten years, and the high PEmg and PB ratios, while the Enterprising Investor is only initially concerned by the level of debt relative to the net current assets. As a result, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $1.46 in 2010 to an estimated $3.06 for 2014. This is a fairly strong level of demonstrated growth which is well above the market’s implied estimate for 6.33% earnings growth over the next 7-10 years. Here, the historical growth in EPSmg over the last five years is around 21.93% per year, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but it may be unrealistic that the company would see such a significant slowdown in growth over the long term. Therefore, the model returns an estimate of intrinsic value above the current price, indicating the company is significantly undervalued at the present time.

Be sure to check out previous ModernGraham valuations of Harley Davidson Inc. for greater perspective!

Read the full valuation on Seeking Alpha!

HOG Chart

HOG data by YCharts

Disclaimer:  The author did not hold a position in Harley Davidson Inc. (HOG) at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Harley Davidson Inc. Quarterly Stock Valuation – September 2014 $HOG

186px-Harley-Davidson.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Undervalued Companies for the Defensive Investor Near 52 Week Lows – September 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Harley Davidson (HOG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Harley-Davidson, Inc. is the parent company for the groups of companies doing business as Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS). The Company operates in the Motorcycles and Related Products (Motorcycles) segment and the Financial Services (Financial Services) segment. The Motorcycles segment designs, manufactures and sells at wholesale heavyweight (street legal with engine displacement of 651+cc) Harley-Davidson motorcycles, as well as a line of motorcycle parts, accessories, general merchandise and related services. The Company conducts business on a global basis, with sales in North America, Europe/Middle East/Africa (EMEA), Asia-Pacific and Latin America. The Financial Services segment consists of HDFS, which provides wholesale and retail financing and provides insurance and insurance-related programs primarily to Harley-Davidson dealers and their retail customers. HDFS conducts business principally in the United States and Canada.
HOG Chart

HOG data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period -FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $62.79
MG Value $90.85
MG Opinion Undervalued
Value Based on 3% Growth $43.98
Value Based on 0% Growth $25.78
Market Implied Growth Rate 6.10%
Net Current Asset Value (NCAV) -$10.74
PEmg 20.70
Current Ratio 1.78
PB Ratio 4.06

Balance Sheet – 6/29/2014

Current Assets $4,373,700,000
Current Liabilities $2,453,600,000
Total Debt $3,794,400,000
Total Assets $10,076,300,000
Intangible Assets $30,300,000
Total Liabilities $6,710,000,000
Outstanding Shares 217,460,000

Earnings Per Share

2014 (estimate) $3.69
2013 $3.28
2012 $2.72
2011 $2.33
2010 $1.11
2009 $0.30
2008 $2.79
2007 $3.74
2006 $3.93
2005 $3.41
2004 $3.00

Earnings Per Share – ModernGraham

2014 (estimate) $3.03
2013 $2.45
2012 $1.98
2011 $1.75
2010 $1.77
2009 $2.34

Dividend History
HOG Dividend Chart

HOG Dividend data by YCharts

Conclusion:

Harley Davidson is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years, and the high PEmg and PB ratios.  The Enterprising Investor’s only initial concern is the level of debt relative to the net current assets.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with research into the company and comparing it to other opportunities.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.77 in 2010 to an estimated $3.03 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 6.10% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.

Be sure to check out the previous ModernGraham valuations of Harley Davidson (HOG) for more perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Harley Davidson (HOG)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Harley Davidson (HOG) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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