Harley Vs. Polaris: Citi's Latest Head-To-Head Investing Battle

• Shares of Harley-Davidson Inc (NYSE: HOG) and Polaris Industries Inc. (NYSE: PII) have both underperformed the market by over 1,000 basis points over the past year.
• Gregory Badishkanian of Citi said in a note on Tuesday that both stocks are "compelling."
• Polaris is "better positioned" on the retail front while Harley's "solid brand" positions the company well for the long term.

Over the past year, shares of both Harley-Davidson and Polaris have underperformed the market given a heightened promotional and competitive environment which impacted retail sales, inventories and ongoing operations.

In a report published Tuesday, Citi analyst Gregory Badishkanian commented that both Harley and Polaris are now "better positioned" as Polaris should benefit from continued strength in the motorcycle segment (especially within its Indian brand) while Harley's "solid" brand positions itself well for the longer-term.

Badishkanian placed the two stocks in a five category battle in which Polaris ultimately came out as the winner.

Retail Sales – Winner: Polaris

Polaris is "better positioned" on the retail front versus Harley. However, Harley's recently announced three-pronged market action plan could continue to yield results.

Longer-Term Outlook – Winner: Polaris

Polaris is set to experience higher revenue growth over the coming years.

International Performance – Tie

Both companies are well positioned to realize international growth by expanding their distribution networks, entering new markets, introducing new products, and increasing brand awareness.

Margin Outlook – Winner: Harley

Overall, Harley's margin profile is "superior" to Polaris and the company is in a better position to expand its margins at a faster rate over the coming years. However, Polaris's increased commitment to LEAN manufacturing and process improvements is still a "positive."

Stock Valuation - Tie

Both stocks' "relatively poor performance" over the past year creates a "decent buying opportunity" as the underlying fundamentals for both names "remain intact."

Of note, shares of Polaris are trading at a higher forward P/E multiple than Harley (15.9x versus 12.3x), driven by the company's better retail sales performance and higher growth outlook.

Rating And Prices Targets

Shares of Harley-Davidson remain Buy rated with an unchanged $67 price target.

Shares of Polaris remain Buy rated with an unchanged $165 price target.