Better Buy: Polaris Industries Inc. vs. Harley-Davidson

Millions of Americans love motorcycles, and it's only natural to think that the companies that make the products you love might make good investments. Many investors don't immediately think of Polaris Industries (NYSE: PII) in connection with motorcycles, but the off-road vehicle specialist made a bigger entry into the business with its purchase of Indian Motorcycle in 2011. Harley-Davidson (NYSE: HOG) is an obvious pick for motorcycle enthusiasts. Neither stock has made big moves lately, but as the summer season is here, investors want to know which of the two motorcycle-making companies looks like a smarter choice right now. Let's look more closely at how Polaris Industries and Harley-Davidson compare on key business measures, with an eye toward figuring out whether one or the other belongs in your investment portfolio.

Neither Polaris nor Harley-Davidson has delivered strong performance to investors lately. Over the past year, Polaris stock is up 4%, while Harley has seen no change. Over the longer run, the stocks haven't been able to regain much ground from major losses in 2015.

From a valuation perspective, even though the two stocks have seen a roughly similar performance, Harley-Davidson looks like the more attractive choice. When you focus on trailing earnings, Polaris looks extremely expensive, with an earnings multiple of 37. Harley-Davidson looks cheap by comparison with a trailing multiple of just 14. To some extent, that disparity results from depressed earnings at Polaris that are expected to rebound. Even if you look at future projections, though, Polaris trades at 18 times forward earnings estimates, which is far higher than the corresponding figure of 12 for Harley. That gives Harley-Davidson an edge over Polaris on the valuation front.

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Source: Fool.com