Harley-Davidson, Inc. (HOG): Should You Add This Wide-Moat Company to Your Portfolio?

However, a closer glance at the numbers suggests shareholders will receive a double-digit annualized return over the next decade. First, the company is a chronic share repurchaser. Management has reduced or held even the company’s share count each year for over a decade. If earnings did not grow at all, earnings per share still would have grown 35% over the last decade simply due to share repurchases.

In addition to being a chronic share repurchaser, Harley-Davidson also invests its money at an above-average rate of return. The company’s return on invested capital — that is, the amount it earns for each dollar invested in its business — has traditionally been over 20%. Although it has fallen off in recent years as the stagnant economy takes its toll on all luxury goods providers, Harley-Davidson, Inc. (NYSE:HOG) will likely resume outsized returns as the U.S. economy picks up again.

As a result of earning an above-average return on invested capital and constantly repurchasing shares, Harley-Davidson will likely grow its earning power per share at a rate that will enable shareholders to reap double-digit annual returns from the current share price.

Ted Cooper has no position in any stocks mentioned. The Motley Fool recommends Polaris Industries.

The article Should You Add This Wide-Moat Company to Your Portfolio? originally appeared on Fool.com.

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