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


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!

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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.

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