On January 22, 2018, Harley-Davidson’s forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple was 13.1x. This forward multiple was based on its estimated EBITDA for the next 12 months.
HOG’s EV-to-EBITDA multiple was significantly higher than that of Japanese auto giant Honda Motor Company (HMC), which was at 7.4x.
PE multiple comparison
Harley-Davidson’s forward PE (price-to-earnings) multiple for the next 12 months is 14.1x, much higher than Honda’s 11.3x.
Interestingly, Harley-Davidson’s valuation multiples tend to be higher than those of its competitors. The company’s ability to maintain the largest global market share in the heavyweight and premium category motorcycle segments could be one of the key reasons for its higher forward valuation multiples.
In a similar fashion, Ferrari’s (RACE) valuation multiples also trade much higher than those of other auto industry players (IYK) such as General Motors (GM) and Ford Motor Company (F). Ferrari’s strong presence in the premium luxury cars segment makes it stand out from other auto giants.
What could be factored in?
Currently, Harley is going through a tough phase as it struggles to boost global sales. The company’s profit margins from the international market segment are also dismal. Other factors, including high competition from European and Japanese motorcycle manufacturers, continue to pose a risk to HOG’s supremacy. A continuation of these risk factors could increase the company’s risk profile and lower its valuation multiples.
Continue to the next article, where we’ll take a look at some key resistance and support levels in Harley-Davidson stock before its 4Q17 earnings event.