Is Harley-Davidson Undervalued?

by Trefis Team
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Harley-Davidson
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No, as per Trefis Price estimate Harley-Davidson’s (NYSE: HOG) stock has a fair value of $37, which is in line with the current market price. Harley-Davidson Motor Company was founded in 1903, and specializes in heavyweight (601cc+) cruiser and touring motorcycles. Harley-Davidson’s major competitors are Triumph, Yamaha, Ducati, and Royal Enfield brands. In the industry the principal factors that determine consumer vehicle preferences in the markets would include overall vehicle design, price, quality, available options, reliability, and functionality.

In this note we discuss our stock price valuation for Harley-Davidson. You can look at our interactive dashboard analysis ~ Harley-Davidson Valuation: Cheap or Expensive? ~ for more details, and also modify our forecasts for the company’s key metrics to understand how changes impact the company’s stock price.

 

#1. Estimating Harley-Davidson’s Total Revenues:

  • Total Revenue decreased from $6 billion in 2016 to $5.7 billion in 2018, and is expected to fall by 6.6% to $5.3 Billion in 2019.
  • The fall is expected due to shrinking market of heavy motorcycles in the US as well as due to the global auto slowdown.
  • Our Interactive Dashboard Analysis, How Does Harley-Davidson Make Money?, provides an in depth view of the Harley-Davidson’s Revenues.

#2. Deriving Harley’s Net Income:

  • Net Income fell from $692.2 million in 2016 to $531.5 million in 2018, and is expected to be around $439.1 million in 2019.
  • This fall will likely be led by a decrease in margins and lower revenues.

#3. Determining Harley-Davidson’s EPS:

  • EPS has fallen from $3.83 in 2016 to $3.21 in 2018, and we estimate it to be $2.81 in 2019
  • EPS fall from 2018 can be attributed to lower Net Income offset by lower Shares outstanding.

#4. Estimating Harley’s Share Price:

Our Price Estimate of $37 for Harley-Davidson’s Stock is based on our Detailed Valuation Model, and implies a 13.2x P/E Multiple on expected 2019 EPS of $2.81. Our interactive dashboard captures how Harley-Davidson compares with its competitors Honda and Yamaha in terms of Revenue and P/E multiple.

 

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