As of July 17, Harley-Davidson’s forward EV[1.enterprise value]-to-EBITDA multiple was 12.3x, significantly higher than Japanese auto giant Honda’s (HMC) 5.8x. Similarly, Harley-Davidson’s forward PE multiple was 12.2x, also much higher than Honda’s PE multiple of 8.8x.
Harley-Davidson’s valuation multiples are typically higher than competitors’ multiples, possibly due to the company’s ability to maintain the largest US market share in the heavyweight and premium motorcycle spaces. Likewise, Ferrari’s (RACE) valuation multiples tend to be higher than those of other auto industry players (FXD) such as General Motors (GM) and Ford (F), primarily due to its strong presence in the premium luxury car segment.
What’s driving Harley’s valuation
For the last couple of years, Harley has been struggling to boost its global sales, and its international profit margins have been weaker than its US profit margins. Also, intense competition from European and Japanese motorcycle manufacturers continue to challenge HOG’s lead. These factors, along with Harley’s sales stagnating in Q2, could increase the company’s risk profile and lower its valuation. Continue to the next part, where we’ll look at some key resistance and support levels for Harley-Davidson stock.