Polaris Industries Inc. (PII), Arctic Cat Inc (ACAT) & Harley-Davidson, Inc. (HOG): Getting Investment Ideas From Recreational Vehicles

The one and only

Harley-Davidson, Inc. (NYSE:HOG) not only manufactures and sells motorcycles, it has built an entire sub-culture around it. Bike riders wear Harley Davidson merchandise such as jackets, gloves, and leather pants. This culture helps keep the Harley Davidson brand alive and well.

However, in 2012, Harley-Davidson, Inc. (NYSE:HOG)’s fundamentals didn’t quite fare as well as its smaller more diverse competitor Polaris Industries Inc. (NYSE:PII). Revenue only increased 5%. Its free cash flow declined 12%.

Harley-Davidson, Inc. (NYSE:HOG) did recently boost its dividend. Last year it paid out only 23% of its free cash flow in dividends. Currently it pays $0.84 per share per year and yields a fairly decent 1.5%.

As the end of 2012, Harley-Davidson, Inc. (NYSE:HOG)’s cash and investments stash equates to 47% of stockholder’s equity. Harley Davidson’s debt resides in the steep range at 171% of stockholder’s equity. Operating income does exceed interest expense by a safe 22 times. Its return on equity calculates to 24%.

You may argue that Harley-Davidson, Inc. (NYSE:HOG) faces demographic tailwinds with the aging of the baby boomers. However, Harley Davidson holds 46% market share in the young adult men and women demographic ages 18-34, according to its investor relations website. The Harley-Davidson, Inc. (NYSE:HOG) culture will transcend the generations.

Conclusion

In summary, due to the economic recovery consumers will feel more comfortable spending money on luxury items such as motorcycles, ATVs, and snowmobiles. These three companies definitely warrant a place on your Motley Fool Watch List and more of your research time.

The article Getting Investment Ideas From Recreational Vehicles originally appeared on Fool.com.

William is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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