WD-40 Company Gears Up for a Double-Digit Stock Advance

Key Points

• WD-40 Company is setting up for sustained growth driven by global markets that will last for many years.
• Cash flow also grows, sustaining the healthy balance sheet and capital return outlook. 
• The WDFC dividend is on par with the broad market average and reliable; analysts are raising targets and leading to new highs.

WD-40 Company’s NASDAQ: WDFC results gave the market reason to pause, but the pause is over, and higher price points lie ahead. The critical takeaway is that this company is growing, investing in new opportunities, and driving sufficient cash flow to sustain a robust balance sheet and healthy capital returns. The dividend isn’t a high yield but aligns with the S&P 500 NYSEARCA: SPY average. It is reliable, and the distribution is growing. The payout ratio runs high at 70% but is offset by cash flow strength and the robust growth outlook. With 51% of revenue still coming from the U.S. and the U.S. only 15% of the global economy, there is quite a lot of opportunity, and executives are taking advantage of it. 

WD-40 Company Grows and Widens Margin in F2024: Guides for More in F2025

WD-40 Company had a good Q4, with revenue growing to $156 million, up 11% compared to the previous year. The revenue outpaced the consensus estimate reported by MarketBeat.com by 450 basis points on strength in all markets and the core WD-40 business. Sales in the Americas are up 6%, led by a 21% gain in APAC and a 16% increase in emerging markets, a critical focus for management. Regarding products, Maintenance Products grew by 12%, offset by a 2% decline in the harvest brands. Maintenance Products sales were driven by a 13% increase in the WD-40 Multi-Use product, a significant factor because the shift to core product growth aided margin improvement. 

The margin news is mixed. The company widened its gross margin by 270 basis points on revenue leverage and mix but fell short of analysts' forecasts on the bottom line. The SG&A expense growth outpaced revenue significantly on growth initiatives, leaving let income at $16.8 million and up only 1%. However, at $16.8 million, the company’s financial position is improving, including the balance sheet health and capacity for capital returns. 

Guidance, including the news to divest the harvest brand Cleaning Products segment, is good. Cleaning products have a good margin, but sales are declining and are a small, single-digit contribution to net sales. Selling the segment will shore up the healthy balance sheet and allow management to focus entirely on growing the core business. Although there is no buyer, guidance reflects the sale. In 2025, continuing revenue is expected to rise by 6% to 11%, with the margin widening slightly to drive 9% to 14% growth in earnings. 

WD-40 Company Is a Dividend Achiever With a Reliable Payment

WD-40 Company’s dividend is on par with the S&P 500 average, yielding about 1.35% in late 2024. The payout is reliable despite the high ratio because of the cash flow and growth outlook. The company produced negative cash flow for the fiscal year because of its investment strategy and growth efforts, but it limits its losses and provides value in return. The cash burn in F2024 was only 3% of the total cash, leaving the company well capitalized with $46.7 million on the books and leverage low. Total liability is less than 0.5x assets and 1x equity. Equity, a measure of shareholder value, is up nearly 10%. 

MarketBeat tracks only two analysts with ratings on WDFC stock, but they are bullish and issued revisions following the FQ4 report. They are DA Davidson and Jefferies Financial Group; they rate the stock at Moderate Buy with one holding and the other buying. Both raised their price targets, and the range favors investors with a low of $280 and a high of $322, indicating a 7.75% upside from the post-release price points and nearly 20% at the consensus. 

The Technical Outlook: WD-40 Company Is Ready to Move Higher

The price action in WDFC shares has been mixed since the report, aligning with activity since July. However, the market is showing support at significant levels, including the 150-day EMA, and is likely to sustain its sideways motion if it doesn’t advance. The MACD and stochastic indicators are also mixed and show a market near equilibrium, ready to make its next move. The bias is to the upside because of growth, cash flow, and capital returns, but there is risk. The market is still below resistance targets at the top of the recent trading range, which may cap gains.