Harley Davidson should be one of those companies that delivers solid, steady investment returns. It has the premier brand name in the manufacture and sale of motorcycles, and earns 23% operating margins in an industry where 14% operating margins are the norm. Heck, can you even name its competitors? I could name Yamaha, Kawasaki, and Polaris, and that was it.
Despite these superior operating results, Harley Davidson stock has barely appreciated in price over the past twenty years. It traded at $29 per share in 1999. It trades in the $30s now.
Why aren’t the shareholders of the most dominant motorcycle franchise on the continent getting any richer?
The answer is because Harley Davidson’s management team is not satisfied with modest single digit (think 4-6%) sales growth, similar earnings per share growth, and the return of cash to shareholders in the form of dividends and share repurchases.
Instead, it wants … Read the rest of this article!