Harley-Davidson 2015 Fat Boy -- It's a classic. But what about the stock? Photo: Harley-Davidson.

Harley-Davidson (HOG 2.00%) stock is up nearly 7% since reporting earnings Thursday, and closed out the week at $40 on the nose. Clearly, investors found something to get excited about last week. But what was it?

After all, when the news came out, Harley-Davidson's headline numbers read like this:

  • Full-year revenues down 4% to $6 billion
  • Full-year earnings down 5% to $3.69 per share
  • Q4 revenues basically flat at $1.2 billion.
  • Q4 earnings down an astonishing 37% at just $0.22 per share.

There's not a lot to like in any of that.

And yet, according to CEO Matt Lavatich, things are still sunny in hog-land. "Although we expect the macro-economic environment to remain challenging," said Lavatich, Harley is experiencing "growing demand" and retains "substantial market leadership."

Statements like these seem to fly in the face of falling revenue numbers. And you have to wonder -- if things are going so great, why Harley feel the need to increase marketing sending by 65%, and increase product development spending by 35%, in 2016? (You also have to wonder if they can afford the additional expense. Although full-year operating profit margins were healthy at 16.5%, Q4 saw margins drop to just 0.6%).

Nevertheless, as bad as things seem, and as questionable as the "growing demand" assertion seems, investor pessimism about Harley-Davidson did seem to have gotten a little bit out of hand prior to the earnings news. Sales and profits may be down, but Harleys are still selling a bit like hotcakes out there.

As far as unit sales went, Harley moved more than 266,000 units in 2015, just 2% fewer than in 2014. And in Q4 in particular, units sales increased 2%, with 48,149 bikes sold in the year's final quarter. That's not scorching growth, exactly, but it is growth.

What comes next?
And call Harley-Davidson a crazy optimist if you like, but they think growth is going to continue in the new year. Issuing new guidance alongside old earnings, Harley-Davidson predicted it will ship 269,000 to 274,000 new bikes this year, growing the volume of unit sales by 1% to 3%. The company doesn't appear to see any need to discount prices to goose demand, either. Profit margins are predicted to range between 16% and 17% -- approximately where they were in 2015.

As far as Harley's prospects go, we're largely going to have to take Harley's word for it, that growth is in the cards. Clearly, growth didn't happen for much of 2015. But it did return in Q4. If Harley-Davidson says sales will continue to grow in 2016, well, we'll give them the benefit of the doubt on that until proven wrong.

This still leaves the question, though, of whether the stock itself is worth owning. So here' s how the valuation looks today:

With net profits of $752 million earned in 2015, and free cash flow of $840 million, Harley stock now sells for 10.2 times earnings and 9.1 times FCF. Both those numbers look cheap relative to the 12.5% long-term growth rate that analysts on S&P Capital IQ posit for the stock. Throw in a 3.2% dividend yield, and Harley-Davidson stock could be downright cheap.

If they return to growth as promised, that is. This year should tell us whether that's likely to happen.