WD-40 Company Is A Multipurpose Stock
With so many trends to back it up, it is no surprise the WD-40 Company (NASDAQ: WDFC) beat consensus on the top and bottom lines. And it’s not like the consensus was all that high. The analysts covering WD-40 have been as lax in their updates for this stock as for any other I’ve seen. Regardless of the consensus, the fiscal Q4/calendar Q3 results were good and put the spotlight on a stock that everybody should own. Not only is WD-40 a well recognized global brand, it has a healthy eCommerce presence, it pays a growing dividend, and has an aggressive plan for growth that is delivering results.
Their plan is a three-pronged approach to the business. The core WD-40 product is being marketed globally to expand its market reach, brand awareness, and range of product uses. They want WD-40 to be a household staple like duck tape. The second prong of the attack is specialty products. The company is expanding the range of specialty WD-40 products to further enhance market depth. The third prong is expanding the product line because WD-40 is a great product by itself but there is only so much growth to be squeezed out of it. Altogether, the company is targeting greater than 100% revenue growth over the next decade.
WD-40 Revenue Beats On Rising Demand In Home-Improvement
WD-40 company reported $111.65 million in net revenue or up 4.6% from the prior year. The figure beats the consensus by 1300 basis points and shows a double-digit acceleration from the previous quarter. Management says markets impacted hardest by lockdowns or with the weakest eCommerce infrastructure performed the worst while those with little to no restrictions saw double-digit growth.
Moving down, gross margins improved to 56% or above the 55% long-term target but were offset by increased SG&A expense. Even so, the GAAP EPS came in at $1.42 or $0.29 better than estimated. The company refrained from giving guidance but results indicate a strong rebound. As for earnings, the analysts are expecting a 10% CAGR for at least the next two fiscal years.
WD-40 Company Is Not Cheap, But You Get What You Pay For
The WD-40 Company is not a cheap stock trading at over 40X this year and next year’s earnings but like so many before me have said, value is where you find it. While this stock trades well above the average market value it is not the average stock. It is a blue-chip brand with a well-established business and a robust outlook for growth. You don’t find that combination very often.
WD-40 also pays a dividend, its yielding less than 1.35% with the spike in prices but it is a safe and growing payment. The company is paying less than 50% of its consensus earnings and has a strong balance sheet as well. The company has some debt but that is mitigating by maturity, the mountain of cash it is sitting on, a moderately low 5X leverage ratio, and oodles of free-cash-flow.
The Technical Outlook: WD-40 Company Pops, Gaps, and Sets A New High
The chart of WD-40 company is among the most bullish I’ve seen in recent months. The stock has been trending upward for years, the pandemic caused barely a pause, and now it is breaking out to new highs. The post-earnings action is, to say the least, very bullish. Price action not only gapped higher at the open, but it also broke to a new post-COVID high, and above the pre-COVID levels to set a new all-time high. The indicators confirm the move with bullish crossovers and/or convergence that suggest underlying strength in the market. I wish I’d bought some yesterday but I don’t think it’s too late now. But maybe start slow and wait for a pullback for the big purchases.
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