We would expect Harley Davidson (HOG) shares to trade sideways over the next six to nine months, as investors re-assess the long-term growth potential of Harley Davidson. After reaching highs in November 2006, the shares are down significantly to the current $47-level. In turn, the valuation is very compelling at 12x forward EPS (forward EPS are estimated to be around $3.90) and a discount to the S&P 500 and other strong branded companies, especially considering the company’s dominant brand and market share, dividend, strong balance sheet with no operating debt, and ongoing share repurchases.
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