With the earnings season for the fourth quarter wrapping up, no commentary about this quarter's performers would be complete without a brief discourse on my No. 1 favorite company, Harley-Davidson.

Harley recently reported that its quarterly earnings rose 14.5 percent to 71 cents per share, vs. 60 cents a year ago. At the same time, revenue increased 5.4 percent to $1.221 billion vs. $1.16 billion a year ago.

With regard to concerns over higher inventory, given that registrations were less than shipments, Jim Ziemer, who takes over as Harley-Davidson's chief financial officer on April 30, said the company has been trying to provide dealers with more inventory as a way to narrow the gap between supply and demand.

It is no secret that for years dealers have been charging premium prices, often above the suggested retail price, for a Harley. In addition, there have been long waits for specific models. Unhappy with the situation, Harley is addressing the problem by ramping up its manufacturing capability.

Harley shipped a total of 80,587 units in the fourth quarter, up 4.6 percent from the same period last year. Going forward, Harley plans to ship 339,000 motorcycles in 2005 and reiterated its goal of producing 400,000 motorcycles per year by 2007.

Meanwhile, the company's gross margin increased to 37.8 percent of revenue, up from 35.9 percent a year ago, the result of manufacturing efficiencies and a favorable impact from currency exchange rates.

Free cash flow continues to be strong as well, though at $676 million it is down slightly from last quarter. The company also bought back more than 10 million shares of outstanding stock during the past year.

For all of 2004, Harley-Davidson's net income rose 16.9 percent to a record $3 per share, vs. $2.50 per share in 2003. Revenue for the year was $5.02 billion, topping the $5 billion mark for the first time, and up 8.5 percent from the previous year. It was also Harley's 19th consecutive year of record profits. Shipments for the year rose 9 percent to 317,289 units.

Furthermore, with nearly a 50 percent market share, Harley's sales continue to benefit from the popularity of television shows such as American Chopper, Biker Build-Off and Motorcycle Mania.

Finally, let us not forget the fairer sex. No longer the province of men, Harley sales in 2003 had women accounting for 10 percent. In fact the Motorcycle Industry Council says women account for about 10 percent of all motorcycle sales nationwide.

From my perspective, there is no stopping this juggernaut, and anyone who thinks the stock is a candidate for short-selling is in a fog. To see why, you have only to calculate Harley's current implicit value. In doing so, I used an initial earnings number of $890 million and allowed those earnings to grow at a rate of 10 percent, a number that is approximately a third less than Wall Street's 5-year average earnings growth rate of 16.18 percent.

If you then discount the results back at a rate of 11 percent (average return of the S&P 500), you get a net present value for the company's next 10 years of earnings of $8.47 billion.

Beyond the 10th year, if you lower the earnings growth rate to 6 percent and increase the discount rate to 12 percent, the result is a net present value of $14.4 billion. (The exact formulas are on www.RuddReport.com)

Add those two figures together, subtract long-term debt of $670 million, divide by the outstanding shares (294 million) and you come up with a per-share intrinsic value of $75.42.

Using the price/earnings approach, if you multiply my current FY 2005 earnings estimate of $3.35 per share by the current trailing 12-month price-to-earnings ratio (P/E) of 19.6, the result is $65.66.

Harley's closing price on Wednesday was $58.82. In my estimation, and you may arrive at a different conclusion, there is the potential for at least a 12 percent increase in the price of the stock over the next 12 months. Once again, the P/E model would correlate closer to the implicit value if Harley traded at a higher multiple, which I believe is just a matter of time.