Harley Davidson

SWOT Analysis

Strengths

* Strong EPS growth

Earnings per share has consistently increased over past three fiscal years for Harley-Davidson. Fiscal year 2002 EPS was $1.94, followed by fiscal year 2003 EPS of $2.517, and finally fiscal year 2004 with EPS of $3.016.

* Increased common stock cash dividends

Over past three years, Harley-Davidson's dividends per share have increased time and time again. Dividend per share in 2002 was $.14, $.20 per share in 2003, and $.41 per share in 2004.

* High gross profit margin

Harley-Davidson has gross profit margin of 39.31%, substantially higher than their closest competitor Polaris, whose gross profit margin is 24.75%.

* Highest market capitalization in industry

As part of recreational vehicles industries sector, Harley-Davidson's market cap of $13.53 billion and price per earnings of $15.05 is higher than that of any competitor.

* Healthy Net Income

Harley-Davidson currently has net income of $938.52 million (unaudited) relative to their key competitor Polaris, which has net income of $148.05million (unaudited).

Weaknesses

* Decreased return on investments

Harley-Davidson's return on equity decreased from 29.32% in fiscal year 2003 to 28.81% in fiscal year 2004. Furthermore, return on assets decreased from 17.32% in fiscal year 2003 to 17.10% in 2004.

* Increased total debt equity

Harley-Davidson's debt ratio remained the same in fiscal year 2002 and 2003 at 34%. However, their debt ratio increased dramatically in fiscal year 2004 to 40%. This constitutes increasing financial risk and may affect their borrowing and/or bond ratings.

* Low annual dividend yield

For investors who enjoy high dividend yields, they may purchase Polaris stock prior to purchasing Harley-Davidson stock. With an dividend yield of 1.30%, it will be difficult to reach to Polaris's dividend yield of 2.50% in the near future.

Opportunities

* Expansion of company in foreign market segments

While Harley-Davidson has market share in Canada, Europe, Japan, and Australia, further investments can be made in other growing economies.

* Purchasing