You still have an opportunity to run wild with the hogs. Harley-Davidson (HOG) has room to run and its valuation points to an open field, asserts growth and income expert Ian Wyatt, editor of High Yield Wealth.

Harley-Davidson shares trade at only 10 times our 2019 EPS estimate of $4. The 10-year average multiple is 16.8 times forward EPS estimates.

We see multiple expansion because we see trade tensions easing between the United States and its trading partners. A step in the right direction occurred over the weekend. 

Multiple expansion, in turn, will lead to a higher Harley-Davidson share price. We see the expansion occurring sooner than later based on Harley-Davidson’s historically low discounted price.  

We’ll concede that the trend in U.S. motorcycles sales has dragged on investor sentiment. U.S. sales have trended lower over the past three years. The trend continued through the third quarter. Harley-Davidson's U.S. sales were off 13.3% compared to the year-earlier quarter.

It’s not just Harley-Davidson, though. The downturn is industry-wide. Sales have trended lower on large-displacement motorcycles. (Those with engines 601 cubic centimeters or larger.) This is Harley-Davidson’s breadbasket.

The good news is that Harley-Davidson still holds the largest basket. It dominates the large-displacement market with a 50.9% share.  Despite the continuing sales slide, management has stuck to previous guidance.

Harley-Davidson expects to ship 231,000 to 236,000 motorcycles for the full year. This is the amount management projected the company to ship at the beginning of the year.

Harley-Davidson has been roiled in 2018. The share price reflects the dyspepsia the roiling has inflicted on shareholders. We shouldn’t let the roiling obscure the positives. This is Harley-Davidson. The enviable economic moat is one positive. Management’s shareholder-centric ethos is another.   

Harley-Davidson continually generates excess cash, much of which can be returned to shareholders as dividends. The dividend is increased annually. The dividend, at $1.48 per share, generates a 3.5% income yield. This is near the top of the historical range. 

Additional cash is distributed through share repurchases — an ongoing process. The share count was 234 million in 2010. It has been reduced to 167 million at last count.

The value proposition is the overarching positive. The shares that remain after the repurchases are on sale at a deep discount. The last time Harley-Davidson priced this low, they doubled over the next 12 months. Suggested Action: Buy Harley-Davidson shares up to $45. 

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