Last Sunday, I finally went after an annoying task that had been waiting for me for too long: to remove sticky and really ugly glue from an entire big window frame. My first attempts failed miserably and I had left it untouched for some time. But that stuff needed to be finally done. After some research, I found the solution: WD-40, the home workers best friend. While in full swing, I remembered that WD-40 is also a publicly listed company! The stock has practically always been extremely expensive, but I haven’t covered it for years. Time for an update to answer the question whether this is a smooth slide or a rusty bet.
Summary and key takeaways from today’s Weekly
– The idea to write this analysis came to my mind over the weekend, when a bottle of WD-40 finally solved an annoying issue for me.
– WD-40 is not only a home worker’s darling, but also a publicly listed company.
– The story is compelling with a case that has been compounding over the long-term. However, the valuation is too high.
WD-40 is not only a brilliant and versatile product, but it is also a publicly listed company of the same name. This case instantly reminded me of Peter Lynch recommending to look for stocks of everyday products with well-known names. The reason is straightforward, as high demand is good for the underlying business and likely the stock, too. Here we are now.
I was a bit surprised that although the product is very well known and practically a household staple (if not, it should), the stock does not enjoy much coverage.
“Not much” is likely even an exaggeration. On Seeking Alpha, it has not even 7k followers. WD-40 Company (ISIN: US9292361071, Ticker: WDFC), as it is called by its full name, went public on the NASDAQ stock exchange in 1973, i.e. 52 years ago. Since then, its stock has multiplied several times and it continues to slowly rob higher.
What sounds like a negative (seemingly not much interest), is indeed a positive.
My longer-time readers know that I like smaller, under-covered stocks where not everybody and their neighbor are already talking about. It’s sufficient when they use the product. 🙂
Let’s have a look ad WD-40 stock today.
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Don’t spray your money too fast on this multi-bagger
WD-40 Company was founded in 1953 and is headquartered in San Diego, California. The Company describes itself as a global marketing organization “dedicated to creating positive lasting memories by developing and selling products that solve problems in workshops, factories and homes around the world”.
And yes indeed, it did solve my problem. The window frame is clean again, free of glue.
I now even have an explanation for why it worked that great (if you’re interested or don’t already know). Glue needs water or moisture to combine with to stick. That’s why it lasts on your finger or practically everywhere where there is air with a certain degree of humidity. Inside the glue’s tube, it’s dry.
WD-40 with its water repelling traits has reversed this chemical reaction and allowed me to wipe away what was left with a cotton cloth. A no brainer I will never forget again. 😀 As I am not a home worker (only working from home), but a brain worker, this was a great pleasure and a big win for me. Nail polish remover also works, but you need to discuss that with your wife and it smells much more noticeable.
For more than four decades, the WD-40 Company sold only one product, the WD-40 Multi-Use Product, the same I have found out to be really handy for many use cases.
It is a multi-purpose maintenance product which acts as a lubricant, rust preventative, penetrant and moisture displacer. The exact formula of WD-40 is a trade secret. WD-40 is not oil-based in the traditional sense (like motor oil) but contains a light petroleum-derived oil. Its solvent-heavy composition makes it more of a penetrating fluid than a thick, long-lasting lubricant.
Over the last several decades, WD-40 has evolved and expanded its product offerings through both, internal research and development activities, and the acquisition of several brands worldwide.
The longest-dated stock chart I was able to find, is from Yahoo Finance. It reaches back until early 1985 when the stock of WDFC was trading for some 12 bucks.
Since then, shares have gone up by a factor of more than 20x, including all dips.
Over these 40 years, this is an average annual return of 7.7% for a very unspectacular company with little spot light. This figure is without counting dividends, though.
Thus, the total return is slightly higher.
According to their website (see here), WD-40 has been paying uninterrupted dividends since 1990. However, the company is not a dividend aristocrat (nor does it hold any other of these rusty, useless titles), as it had cut its dividend after the burst of the dotcom bubble. And subsequent to the Great Recession a few years later, it held the payout steady for some time before it resumed with frequent raises.
In between and in the earlier years, there were a few special dividends paid out. The chart below shows the bigger dip post-2020 and then a more or less steady path upwards (with a pause around 2008–2010).
All in all and at first sight, a solid long-term compounder.
And there’s a reason for that. Not only has WD-40 been a beneficiary of a growing worldwide economy. With its strong brand, reliable cash flow generation as well as an asset-light and high capital returns business model, the wheel does not have to be constantly lubricated or reinvented.
That’s the formula for success, it seems.
What I liked and welcomed very much was the length of their annual report. Instead of a fine-print BS-pamphlet, this looks exactly like I want an annual report to be.
By the way, other companies with first-class, short but to-the-point annual reports are Apple (ISIN: US0378331005, Ticker: NFLX) and Netflix (ISIN: US64110L1061, Ticker: NFLX).
WD-40’s sales come from two product groups – maintenance products plus home care and cleaning products. The latter (respectively certain products and brands) is currently for sale with a closure expected some time during 2025. It is less attractive due to lower growth rates and margins.
In the annual report, the company calls them “harvest brands”. After the sale is through, total figures will go down a bit, but growth and margins will see an uptick.
Over the years, the research and development team has brought to market key innovations including names like WD-40 EZ-Reach Flexible Straw®, WD-40 Smart Straw®, WD-40 Trigger Pro®, WD-40 Specialist®, WD-40 Specialist® Degreaser & Cleaner EZ-Pods, WD-40® Precision Pen, WD-40 BIKE®, 3-IN-ONE RVcare® and 3-IN-ONE® Professional Garage Door Lube.
Over the last ten years, the business did what it was doing ever since. Slowly, but smoothly grinding higher, temporarily interrupted by hiccups in the economy.
The first chart shows total sales, …
… followed by operating income (green) and cash flow (orange) on the second graphic.
The fiscal year 2022 had temporary inventory issues which were solved. Higher results followed briefly thereafter.
The more recent business development per end of February 2025 (WD-40’s half-year results) showed solid numbers. Sales for the quarter were up by 5%, operating income by 11%, the one-off tax-adjusted net income even by +15% (and +16% per share).
Sales of the core maintenance products (e.g., WD-40 Multi-Use) rose 6%, aligning with the mid-to-high single-digit growth targets. The home care product segment saw declining sales, so it’s understandable WD-40 wants to clean house.
On the same ocasion, management revised fiscal year 2025 gross margin and earnings per share guidance upward. EPS are now expected to be 5.25–5.55 USD. This new range reflects anticipated growth of between 11–17 percent compared to 2024 pro forma results (assuming the home care assets will be sold).
Further, modest price adjustments in FY26 are on the table to counter inflation.
The earnings presentation was in early-April, thus straight into the lubrication liberation day and tariff doldrums. The tariff impact for the company will likely be small due to diversified local production (via third-party) and supply chains. Mexico and Canada (~6% of sales) may see some impact. Some inventory was built to mitigate at least short-term tariff risks.
That’s the current big picture.
Just for the sake of completeness – and also because it did interest me personally – the company is still very dependent on its core multi-use product. As show below, it was responsible for ~78% of total sales in the quarter.
When home care is subtracted from the equation, the share is 80%.
On the next screenshot, we can see that the for-sale home care segment generates significantly less than 10% of sales, closer to 5%. So, it will be a small strategic divesture, not a revolutionary break-up of the company.
Before, I discussed the dividend briefly.
Management likewise uses parts of its strong cash flow for occasional acquisitions and buybacks. Buybacks at the moment do not seem to be moving the needle much.
But looking onto the balance sheet, we can see the company repurchased around a third of its outstanding stock over the long-term.
Having mentioned the balance sheet, it is not entirely debt-free, but crystal-clean nonetheless. Net debt is very modest with only 71 mn. USD against a working-capital adjusted free cash flow that is higher in a single year than the debt figure.
Until here, it reads like a very compelling case.
The thing is, the valuation is a bit too rusty to glide smoothly with this setup, even with the company’s lubricant legacy. As investing is not based on past performance, we need to put things into perspective and be realistic. Trees don’t grow into the sky.
My first step is to check the (static) valuation multiplies. An enterprise value to free cash flow of ~38x is clearly tough to swallow. Part of the truth is that the stock optically is never on sale. But the company is a relatively solid, predictable compounder.
That’s why I pulled out the DCF model to play around with some growth assumptions.
We have seen above the recent growth rates and we know that management targets mid- to high-single digit growth. So, even if we are generous and assume earnings per share or free cash flow per share to expand by 10% annually for ten years, demanding a 10% return (discount rate) and start with a FCF of 90 mn. USD, the DCF calculator tells us two things:
- the downside is a third – that’s substantial
- alternatively, the expected return is closer to 7.95%, but not 10%
The third alternative would be higher growth rates, but I do not want to overstretch it here. Thus, a very interesting story and stock for the watchlist.
Coincidentally during 2022, WD-40 was trading around a third lower compared to today. It was even more than a third, almost 50%, from its all-time high which is still in place by the way.
Time to be patient and spray when the opportunity arrives.
Conclusion
The idea to write this analysis came to my mind over the weekend, when a bottle of WD-40 finally solved an annoying issue for me.
WD-40 is not only a home worker’s darling, but also a publicly listed company.
The story is compelling with a case that has been compounding over the long-term. However, the valuation is too high.
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