Which Stocks Are Better Than Harley-Davidson’s Stock?

by Trefis Team
+33.60%
Upside
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Trefis
HOG
Harley-Davidson
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We believe that there are other stocks that are currently better valued than Harley-Davidson’s stock (NYSE: HOG). HOG’s current price-to-operating income ratio (P/EBIT) of 15.2x is higher than levels of 13.1x for Oshkosh (NYSE: OSK), 12.9x for Paccar (NASDAQ: PCAR) and 4.8x for  General Motors (NYSE: GM). These stocks have a lower valuation (P/EBIT) compared to Harley-Davidson, while most of them have seen better revenue and operating income growth. This disconnect between valuation and performance could mean that you are better off buying OSK, PCAR and GM vs. HOG stock. More specifically, we arrive at our conclusion by looking at historical trends in revenues, operating income, and P/EBIT for these companies. Our dashboard – Better Bet Than HOG Stock: Pay Less To Get More From Stocks OSK, PCAR, GM – has more details – parts of which are summarized below.

1. Revenue Growth

Harley-Davidson’s Revenues, fell at an average rate of 9.8% over the last two years, as compared to average revenue growth of 1.1% for Oshkosh, 1% for Paccar, and -5.5% for General Motors. If we look at the revenue growth over the last twelve month period, Harley-Davidson’s revenue growth of 14.6% compares favorably with a 2.6% growth of Oshkosh and 13.1% of General Motors, but it is lower compared to the average growth of 16.2% for Paccar.

2. Operating Income Growth

The two-year average operating income growth for Harley-Davidson stands at -52.5% compared to 7.1% of Oshkosh. Paccar and General Motors saw a fall of 2.6% and 6.2%, respectively, in the same period. If we look at operating margin growth for the last twelve months Harley-Davidson’s operating margin growth of 169% is better than all the other three companies, but the growth seems quite high because of the heavy fall in net income in 2020. Meanwhile in the last twelve months the operating margin of Oshkosh grew by 0.8%, Paccar’s grew by 25.9%, and General Motors grew by 100%.

The Net of It All

As we can see over the last two years, Oshkosh, Paccar, and General Motors have higher revenue growth and operating income growth compared to Harley-Davidson. Despite better profit and revenue growth in the last three years, these companies have a comparatively lower P/EBIT. Harley-Davidson’s persistent underperformance in revenue and operating income growth compared to the other three companies reinforces our conclusion that the stock is expensive compared to them, and we think this gap in valuation will eventually narrow over time to favor the group of more attractively priced names. As such, we believe that Oshkosh, Paccar, and General Motors are currently better buying opportunities compared to Harley-Davidson.

Also Harley-Davidson’s Peer Comparisons summarizes how the company fares against peers on metrics that matter.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.

 Returns Dec 2021
MTD [1]
2021
YTD [1]
2017-21
Total [2]
 HOG Return 0% 3% -35%
 S&P 500 Return -2% 22% 105%
 Trefis MS Portfolio Return -3% 40% 276%

[1] Month-to-date and year-to-date as of 12/6/2021
[2] Cumulative total returns since 2017

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