WD-40 Co (WDFC, Financial) recently experienced a daily loss of 8.6%, contributing to a three-month decline of 14.18%. With an Earnings Per Share (EPS) of $5.01, investors are keenly observing its valuation. The pressing question is whether WD-40 Co (WDFC) is fairly valued at its current market price. To address this, we delve into a detailed valuation analysis, offering readers a clearer picture of the stock's intrinsic value.
Understanding WD-40 Co's Business and Valuation
WD-40 Co manufactures and sells a wide array of lubricants and cleaning products, with its signature WD-40 aerosol spray being a household name. The company operates across three geographical segments: Americas, Europe/Middle East/Africa, and Asia-Pacific, with the Americas being the largest revenue contributor. Comparing the current stock price of $233.18 to the GF Value of $229.82, we get an initial indication of the stock's fair market valuation. This comparison sets the stage for an in-depth analysis of WD-40 Co's intrinsic value.
Deciphering the GF Value
The GF Value is a unique valuation metric that considers historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. This proprietary measure indicates the stock's ideal fair trading value, known as the GF Value Line. When a stock trades significantly above this line, it may be overvalued, suggesting poorer future returns. Conversely, trading below the line could indicate undervaluation and potentially higher returns. Currently, WD-40 Co's stock price hovers around the GF Value Line, suggesting that it is fairly valued.
As a result, the long-term return of WD-40 Co's stock is likely to align closely with the company's business growth rate.
Financial Strength Assessment
An essential aspect of stock evaluation is assessing a company's financial strength. A robust financial position minimizes the risk of loss. WD-40 Co's cash-to-debt ratio of 0.43 is mid-range within its industry, but its overall financial strength is rated a strong 8 out of 10. This suggests that WD-40 Co is financially robust, a reassuring sign for investors.
Profitability and Growth Prospects
Consistent profitability is a hallmark of a less risky investment. WD-40 Co has maintained profitability over the last decade, with impressive operating margins that outperform a majority of its industry peers. This level of profitability, coupled with a strong profitability rank of 9 out of 10, underscores the company's solid financial health.
Growth is another critical factor in valuation. WD-40 Co's average annual revenue growth is commendable, though its three-year average EBITDA growth is moderate when compared to industry counterparts. These growth metrics warrant consideration when forecasting the company's future value creation potential.
Comparing ROIC and WACC
Comparing Return on Invested Capital (ROIC) with the Weighted Average Cost of Capital (WACC) is another way to gauge profitability. WD-40 Co's ROIC of 21.66 far exceeds its WACC of 5.05, indicating efficient capital use and value creation for shareholders. This positive spread is a strong indicator of the company's financial performance.
Conclusion
Overall, WD-40 Co (WDFC, Financial) appears to be trading at a fair value. The company's financial condition is robust, and its profitability is impressive. While its growth may not lead the industry, it remains a vital factor in the company's valuation. For a deeper dive into WD-40 Co's financials, investors can explore the company's 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
