Harley Davidson’s (NYSE:HOG) stock hit an all-time high Tuesday, and the company’s performance is a far cry from where it was in the fourth quarter of 2008.

But after a great rebound – the stock has surged 292% since then — is Harley’s stock still a buy?

Harley is a good economic bellwether.  After all, the fourth quarter of 2008 was the very worst part of the financial crisis. And it clearly hit Harley’s financial performance hard. Back then, it reported a 58% profit plunge, a 7% sales decline, and 1,100 layoffs.

But that’s all over for now, and here are some reasons to consider buying its stock:

• Good earnings reports.  Harley has been able to meet or surpass analysts’ expectations at a pretty consistent rate and has done so in five of its last six earnings reports. In its latest earnings report on Tuesday, it beat analysts’ expectations of earnings and revenue. Thanks to greater confidence, consumers wanted to upgrade to new bikes. And Harley is attracting new groups of bikers as women, blacks and people under 35 join the motorcycle ranks – and it’s expanding its market share overseas.
• Its stock is fairly priced.  Harley’s price-to-earnings-to-growth of 1.01 (where a PEG of 1.0 is considered fairly priced) means it is a very fair price. It currently has a P/E ratio of 33.92 and is expected to grow EPS 33.6% in 2012.

However, there are two reasons to resist investing in this stock:

• It is under-earning its cost of capital.   Although its performance is improving, Harley is still earning less than its cost of capital. It did produce positive EVA Momentum, which measures the change in “economic value added” (essentially, profit after deducting capital costs) divided by sales. In the first half 2011, Harley’s EVA momentum was 6%, based on first six months’ 2010 annualized revenue of $4.3 billion, and EVA that rose from negative $465 million annualizing the first six months of 2010 to negative $213 million annualizing the first six months of 2011, using a 12% weighted average cost of capital.

• Sales are shrinking as its debt grows. Harley’s revenue has shrunk at an average rate of 3% over the last five years and its net income has plunged at a 23% annual rate over that period. Its debt has been rising more than twice as quickly as its cash.  Specifically, its cash has increased at a 20% annual rate from $897 million (2006) to $1.9 billion (2010) while Harley’s debt rose at 51% annual rate from $870 million to $4.6 billion. Harley’s long-term debt ranks it the highest in its industry, as does its debt-to-equity ratio of 2.26.

With a dividend of 50 cents a share giving a yield of 1.2%, Harley offers something for those who like income. If it can continue to expand into new demographic groups and geographic markets, Harley’s stock could keep growing. But its balance sheet puts it at risk should there be another economic downturn.

If you strap your portfolio to this stock’s engine, make sure you wear a helmet.

Peter Cohan has no financial interest in the securities mentioned.