Is Harley-Davidson, Inc. Still a Buy After a Yearlong Run?

American hog king Harley-Davidson (NYSE: HOG  ) is riding high in the saddle. The company has multiple tailwinds pushing it higher and higher, from strength in overseas markets to a constant stream of new, innovative models generating renewed buzz in the U.S.

Harley has come a long way since its troubles and bouts of bankruptcy, and investors are feeling the love. Earnings are growing by double-digit amounts, and improving margins should keep the bottom line moving in the coming periods. The question now is whether or not Harley-Davidson is still a buy after its 30% run-up over the past 12 months.

Full speed
The hog is officially back in style, as Harley posted worldwide sales growth of nearly 6% in the most recent quarter. Shipments were up more than 7%, and operating margins continue to improve. Leading the way is international sales, which grew roughly 11%, led by Asia-Pacific (20.5%) and followed by EMEA and Latin American sales.

U.S. motorcycle sales rose just 3%, but that is nonetheless an encouraging figure in today's tepid economy.

The most encouraging figure comes from the company's data crunchers. As Harley-Davidson has stepped up its outreach programs to gain new customers (and tap into younger, more varied demographics), the percentage of sales attributed to these customers has increased markedly. The sales growth rate from this segment has been double that of the core customer segment over the past year. Harley is targeting women, African Americans, and Hispanics -- all sales demographics that have seen strong improvement.

The road ahead
For Harley-Davidson, things look good down the road. It expects between 7% and 9% growth for worldwide shipments, and should hold an operating margin as high as 18.5% for the year. The latter figure isn't as high as the just-ended quarter, but maintains the improvements over last year's operating efficiency.

While Harley-Davidson is a longtime American icon, its relevance on a global level is relatively nascent. With the company's success abroad and in new demographics, Harley is tapping into a wide range of new customers. The young people love the new products, many of which are designed for urban, efficient lifestyles (as opposed to the giant hogs that their parents grew up with). Last year, the company introduced its biggest model shakeup in history. This year, Harley has bikes such as the Street 500 and 750. These small-bore, introductory bikes are reintroducing the brand to a younger, discerning customer base.

So, is Harley a buy today? At a little more than 15 times forward expected earnings, the stock isn't cheap, but it is a discount compared to some of its recreational vehicle brethren. Polaris Industries, which recently rebooted the Indian motorcycle brand, trades at 17 times earnings. Polaris is growing quickly, too, and holds a larger range of products. Where Harley-Davidson is exceeding, though, is with its aforementioned outreach program. The company has just begun to scratch the surface of its new demographics, and the results are truly compelling. Efforts such as using recently introduced models in training programs for new riders, and it's resulting in fantastic conversion rates. As Harley further understands its fastest-growing customer base, investors can expect compelling shipment and sales growth. Keep an eye on the growth rates for outreach customers in coming quarters -- this is the crux of Harley-Davidson's stock today.

Basically, investors are paying growth prices for what is likely to be a growth stock in the coming years. For those unconcerned with getting the best price possible for the value delivered, the company is a well-run business with plenty of appeal. By most accounts, Harley-Davidson is ready to growl some more.

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