WD-40 Company (NASDAQ:WDFC) Growth Continues

A Growth Strategy On Steroids

The WD-40 Company (NASDAQ:WDFC) has proven its long-term growth strategy is working. The company is focused on expanding its markets and market-depth around the world and that effort led to robust revenue growth. Not only that but the company is leveraging its growth and volume increases to full effect and driving above-trend results on the bottom line. The only downside to this stock is the dividend, WDFC yield less than 1.0% after the post-release surge in prices but there is a silver lining. This company is a dividend grower with a 20 distribution CAGR and overdue for a distribution increase.

 WD-40 Company Has Game-Changing Quarter

To say the WD-40 Company reported a strong quarter is an understatement. The net consolidated revenue of $124.56 million is up 26.4% from the previous quarter and beat the consensus estimate by 1500 basis points. On a sequential basis, the revenue is up 10% but, more importantly, growth accelerated from 4.6% in the fiscal 4th quarter. Revenue growth was strong across all operating segments and verticals attesting to the strength of the company’s growth efforts.

In the Americas, sales of WD-40 products increased by 16% while the EMEA segment grew 40% and Asia-Pacific by 24%.  Moving down the report, the company’s growth is proving leverage to earnings as company efficiencies improve. The gross margin increased by 210 basis points to 56.4% helping to fuel a 787 basis point improvement in operating margin. FX impacts provided a favorable tailwind as well and are expected to continue aiding margin in 2021. SG&A expenses increased in tandem with the rise in revenue but at a much smaller 10% rate to provide some additional leverage.

On the bottom line, the company’s net income is up 94% from the same time last year putting GAAP earnings at $1.72 and above consensus. The GAAP earnings beat consensus by $0.69 and more than suggest the current consensus for 2021 is far too low. Unsurprisingly, company execs raised the 2021 guidance to a range above the consensus. The $435 to $470 in expected sales tops the consensus by $10 million or 235 basis points at the low end.

WD-40 Company Due For A Dividend Increase

The WD-40 Company is a dividend-grower with 11 years of consecutive increase up until the past year. Understandably, execs did not issue an increase in 2020 due to uncertain market conditions and an early-year decline in YOY revenue. Now, however, with the peak of pandemic hurdles behind it and accelerated growth on the table the company is in a position to resume distribution increases. Based on the balance sheet, cash, debt, leverage, and outlook for growth the company could easily match the 20% distribution CAGR it already boasts.

The Technical Outlook: Don’t Be Surprised If There Is Some Profit-Taking

The chart of WDFC is what every trader and investor dreams of. The company stock has seen a steady increase in price that has only accelerated in recent years. The FQ1 2021 report was so unexpectedly good that prices are up another 14% in the pre-market action. Where prices go from here is anybody’’s guess but there is a reason to think profit-taking may be in order now that prices are so high. Investors are making a lot of money, it’s good to lock in some profits. Add to that the incredibly high 55X earnings the company is trading near, and the below-average dividend yield, and there are more reasons than one to lighten up on this stock. For those interested in getting in to this growth story, better to wait and see what happens with price-action before making any big decisions.