2-Star Stocks Poised to Plunge: Harley-Davidson?

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, motorcycle specialist Harley-Davidson (NYS: HOG) has received a distressing two-star ranking.

With that in mind, let's take a closer look at Harley's business and see what CAPS investors are saying about the stock right now.


Headquarters (Founded)

Milwaukee (1903)

Market Cap

$9.19 billion


Motorcycle manufacturers

Trailing-12-Month Revenue

$5.21 billion


CEO Keith Wandell (since 2009)

CFO John Olin (since 2009)

Return on Equity (Average, Past 3 Years)



$1.61 billion / $5.57 billion

Dividend Yield



Honda Motor (NYS: HMC)

Polaris Industries (NYS: PII)

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 22% of the 1,871 members who have rated Harley believe the stock will underperform the S&P 500 going forward. These bears include nckballard and SwanGreenSwan.

About a month ago, nckballard touched on Harley's seemingly unsustainable valuation: "The overall economy will see slow growth over the next several years at least. With slow growth in consumer demand for large discretionary purchases and increased competition, there is no justification for such a high P/E ratio."

Harley even sports an EV/EBITDA ratio of 12.3. That represents a premium to rivals Honda (10.7) and Polaris (10.1), as well as other recreational vehicle stocks like Winnebago Industries (NYS: WGO) (9.1).

CAPS member SwanGreenSwan elaborates on the bear case:

Harley is: 1) losing market share in the USA, a sign that consumer tastes have begun to shift to quieter, less expensive and more fuel efficient toys which suggests its pricing power is waning ... 3) EPS estimates appear vulnerable to reductions. 4) its financial services arm has a poor credit underwriting history ... 6) its premium multiple is likely to evaporate on the above factors. Dangerous curves ahead of estimate and multiple reduction. Remember there is rarely just one cockroach.

What do you think about Harley, or any other stock for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!

Interested in another easy way to trackHarley?Add it to your watchlist.

At the time thisarticle was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool owns shares of Winnebago. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.