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| | Why Harley-Davidson?
Description of the Business
Harley-Davidson (HOG) designs, manufactors and sells motorcycles at wholesale.
In 2003 the Buell Motorcycle Company became a wholly-owned subsidiary of HOG.
In August 2008, Harley-Davidson purchased the Italian motorcycle manufacturer MV Augusta.
Analysis of Competitors
The main competitors of HOG are:
- Honda Motor (Japanese)
- Suzuki (Japanese)
- Kawasaki (Japanes)
- Yamaha (Japanese)
- Aprilia (Italian - privately owned)
- Ducati (Italian - privately owned)
The motor cycles market is dominated by the Japanese manufacturers.
However , the Harley-Davidson motorcycles have a distinctive design. The brand Harley-Davidson is very strong and brand loyalty is high.
Competitive Advantages
The main competitive advantage of HOG is the strong brand Harley-Davidson. The Harley-Davidson brand is not only associated to their uniquely designed motorcycles, but also to a "Harley-Davidson" lifestyle, which consists of touring on a Harley with a Harley look.
Financial Analysis
Their balance sheet is very strong. They have no debt and 4 billion in cash. The return on equity is about 30% and the return on assets is about 15%.
They have a profit margin of about 20%.
These are all indications that they have a competitive advantage and they can increase revenue and create value by increasing prces, developing new brands and increasing market share of their current brands..
Risks
The following risk could adversely impact future cash flows:
- The motorcycle business is very cyclycal
- Popularity of the brand could decrease
- HOG needs the financial markets to finance motorcycle loans. This market could dry up during recessions and during the credit crisis.
We conclude that the risk of HOG is high due to the current credit crisis and the difficulties to finance motorcycle loans.
Management Team
The management team of HOG is experienced.
Valuation Calculation
The cash flow value of HOG is about $30 a share, based on a cash flow of $3 a year. The value of their brand |
