WD-40 Company (WDFC) is scheduled to release its fiscal 2024 first quarter financial results on January 9. Wall Street anticipates the company to generate $134.40 million in revenue, indicating a 7.6% year-over-year rise. However, the company’s EPS is expected to decline 2% from the prior year’s period to $1.00.
Entering fiscal year 2024, the company has initiated the deployment of its Four-by-Four Strategic Framework, intricately aligned with its core purpose and values. The innovative paradigm encompasses four Must-Win Battles concentrated on net sales expansion and four Strategic Enablers dedicated to achieving operational excellence.
Sara Hyzer, WDFC’s vice president, finance and CFO, said, “The solid top line growth that we experienced in fiscal year 2023 is a testimony to our resilient business model. Our net sales growth of 7 percent on a non-GAAP constant currency basis aligns with our long-term revenue target of mid-to-high single digit growth."
She added, "We also continue to generate strong cash flow, which is attributable to our gross margin improvement, asset light business model, and disciplined approach to capital allocation.”
Additionally, in upholding the ethos of perseverance, innovation, and tenacity that birthed the WD-40® Multi-Use Product seven decades ago, the company unveiled its latest triumph on July 26 last year, the WD-40® Precision Pen. The portable marvel is designed to dispense the Original WD-40 Formula with unparalleled precision.
This compact, portable product, delivering the Original WD-40 Formula with pinpoint precision, taps into a niche market and could potentially expand sales and market share, bolstering the company's financial standing through strategic diversification.
Shares of WDFC have plunged 3% over the past month. However, it has gained 43% over the past year to close the last trading session at $232.48.
Here are the financial aspects of WDFC that could influence its performance in the near term:
Robust Financials
For the fiscal 2023 fourth quarter that ended August 31, 2023, WDFC’s net sales increased 7.7% year-over-year to $140.45 million. Its gross profit grew 16.7% from the year-ago value to $72.13 million. In addition, its net income and EPS rose 12.1% and 12% from the prior year’s quarter to $16.58 million and $1.21, respectively.
Moderate Historical Growth
Over the past five years, WDFC’s revenue increased at a CAGR of 5.6%. Its EBITDA rose at a 2.5% CAGR during the same period. In addition, its net income and EPS grew at marginal CAGRs over the same time frame.
Stretched Valuation
In terms of forward non-GAAP P/E, WDFC is trading at 45.61x, 152.8% higher than the industry average of 18.05x. Its forward EV/Sales of 5.62x is 235.5% higher than the 1.68x industry average. Moreover, the stock’s forward Price/Sales of 5.48x is 382.6% higher than the 1.14x industry average.
High Profitability
The stock’s trailing-12-month gross profit margin of 51.04% is 51.4% higher than the industry average of 33.72%. Its trailing-12-month EBITDA margin of 18.22% is 61.8% higher than the 11.26% industry average. Moreover, the stock’s trailing-12-month levered FCF margin of 14.45% compares with the industry average of 4.86%.
POWR Ratings
WDFC’s outlook is apparent in its POWR Ratings. The stock has an overall rating of C, which translates to Neutral in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. WDFC has an A grade for Quality, which is in sync with its higher-than-industry profitability.
However, the stock has a C grade for Growth, which corresponds with its middling growth record, while WDFC’s D grade for Value reflects the company's stretched valuation.
WDFC is ranked #32 in the B-rated 57-stock Home Improvement & Goods industry. Click here to access WDFC’s Momentum, Stability, and Sentiment ratings.
Bottom Line
WDFC is strategically positioned for sustained growth by aligning its operations with core values. The company's trajectory is supported by resilient business practices, an unwavering commitment to innovation, and a relentless focus on delivering value.
This is exemplified by the successful introduction of products such as the WD-40 Precision Pen, showcasing WDFC's dedication to meet evolving market needs. Furthermore, the company's robust profitability and stability serve as compelling indicators of its strength.
However, WDFC currently carries a valuation higher than the industry average. As a result, it could be wise to wait for a better entry point in WDFC.
How Does WD-40 Company (WDFC) Stack Up Against Its Peers?
While WDFC has an overall grade of C, equating to a Neutral rating, you may check out these other A (Strong Buy) stocks within the Home Improvement & Goods industry: Steelcase Inc. (SCS), Hamilton Beach Brands Holding Company (HBB), and Lifetime Brands, Inc. (LCUT). To explore more Home Improvement & Goods stocks, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
WDFC shares were trading at $235.49 per share on Monday morning, up $3.01 (+1.29%). Year-to-date, WDFC has declined -1.50%, versus a -0.99% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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