WD-40 (WDFC)

Household products company WD-40 (NASDAQ:WDFC) announced better-than-expected revenue in Q3 CY2025, with sales up 4.8% year on year to $163.5 million. On the other hand, the company’s full-year revenue guidance of $642.5 million at the midpoint came in 1.1% below analysts’ estimates. Its GAAP profit of $1.56 per share was 24.3% above analysts’ consensus estimates.

Company Overview

Short for “Water Displacement perfected on the 40th try”, WD-40 (NASDAQ:WDFC) is a renowned American consumer goods company known for its iconic and versatile spray, WD-40 Multi-Use Product.

Household products stocks are generally stable investments, as many of the industry's products are essential for a comfortable and functional living space. Recently, there's been a growing emphasis on eco-friendly and sustainable offerings, reflecting the evolving consumer preferences for environmentally conscious options. These trends can be double-edged swords that benefit companies who innovate quickly to take advantage of them and hurt companies that don't invest enough to meet consumers where they want to be with regards to trends.

Major competitors include Clorox (NYSE:CLX), Procter & Gamble (NYSE:PG), and Unilever (NYSE:UL).

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

With $620 million in revenue over the past 12 months, WD-40 is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with retailers.

As you can see below, WD-40’s sales grew at a mediocre 6.1% compounded annual growth rate over the last three years. This shows it couldn’t generate demand in any major way and is a tough starting point for our analysis.

This quarter, WD-40 reported modest year-on-year revenue growth of 4.8% but beat Wall Street’s estimates by 6.2%.

Looking ahead, sell-side analysts expect revenue to grow 4.9% over the next 12 months, similar to its three-year rate. This projection doesn't excite us and implies its products will face some demand challenges.

WD-40 has best-in-class unit economics for a consumer staples company, enabling it to invest in areas such as marketing and talent to grow its brand. As you can see below, it averaged an elite 54.2% gross margin over the last two years. That means for every $100 in revenue, only $45.76 went towards paying for raw materials, production of goods, transportation, and distribution.

WD-40 produced a 54.7% gross profit margin in Q3, in line with the same quarter last year. On a wider time horizon, WD-40’s full-year margin has been trending up over the past 12 months, increasing by 1.7 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

WD-40’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 16.5% over the last two years. This profitability was top-notch for a consumer staples business, showing it’s an well-run company with an efficient cost structure. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, WD-40’s operating margin might fluctuated slightly but has generally stayed the same over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, WD-40 generated an operating margin profit margin of 17.1%, up 1.7 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, and administrative overhead.

Revenue trends explain a company’s historical growth, but the change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

In Q3, WD-40 reported EPS of $1.56, up from $1.23 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects WD-40’s full-year EPS of $6.68 to shrink by 9.4%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

WD-40 has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition. The company’s free cash flow margin was among the best in the consumer staples sector, averaging 14.1% over the last two years.

Taking a step back, we can see that WD-40’s margin dropped by 1.4 percentage points over the last year. If its declines continue, it could signal increasing investment needs and capital intensity.

WD-40’s free cash flow clocked in at $28.59 million in Q3, equivalent to a 17.5% margin. This cash profitability was in line with the comparable period last year and above its two-year average.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although WD-40 hasn’t been the highest-quality company lately, it found a few growth initiatives in the past that worked out wonderfully. Its five-year average ROIC was 27.1%, splendid for a consumer staples business.

WD-40 reported $58.13 million of cash and $95.42 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $111.3 million of EBITDA over the last 12 months, we view WD-40’s 0.3× net-debt-to-EBITDA ratio as safe. We also see its $1.92 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly WD-40 blew past analysts’ revenue expectations this quarter. We were also glad its EBITDA outperformed Wall Street’s estimates. On the other hand, its gross margin missed and its full-year revenue guidance fell slightly short of Wall Street’s estimates. Overall, we think this was still a decent quarter with some key metrics above expectations. The stock traded up 4.3% to $210.01 immediately after reporting.

Updated: December 4, 2025 at 9:47 PM EST

When considering an investment in WD-40, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

WD-40 isn’t a bad business, but we have other favorites. Although its revenue growth was mediocre over the last three years and analysts expect growth to slow over the next 12 months, its powerful free cash flow generation enables it to stay ahead of the competition through consistent reinvestment of profits. Be wary, however, as WD-40’s projected EPS for the next year is lacking.

WD-40’s P/E ratio based on the next 12 months is 32.1x. At this valuation, there’s a lot of good news priced in - we think there are better opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $264.50 on the company (compared to the current share price of $194.01).