WD-40 Company (WDFC): a quality stock, but an expensive one

2026-07-04 · By Lubin Danilo, founder of Lubin Investment

WD-40 reports earnings on July 9, 2026. It is a highly profitable business that needs almost no capital, with a nearly unavoidable brand. But the stock now trades near 44 times its annual cash flow, well above its sector. A good business is not always a good buy at this price.

WD-40 (WDFC) reports earnings July 9: what to know first

On July 9, 2026, after markets close, WD-40 Company (ticker WDFC) will report its fiscal third quarter results. You almost certainly know the product without knowing the company: that little blue and yellow can with the red cap sitting in eight out of ten American homes, able to free a rusted bolt or silence a squeaky door. But behind this iconic product sits a stock that raises a real question about price.

I am going to show you how I analyze it with my method: first the quality of the business, then the price of the stock. Two separate questions, almost always confused, that give two opposite answers here: WD-40 is a good business, but its stock is not necessarily a good one at the current price.

• WD-40 Company (WDFC) reports fiscal third quarter results on July 9, 2026, after markets close.
• On my quality grid, the company scores 8 out of 10: profitable, lightly indebted, very efficient at turning capital into cash.
• Its growth is slowing (6.4% a year over 5 years, versus more than 10% I look for) and margins are compressing slightly.
• The stock currently trades near 44 times its annual free cash flow, versus a sector average of roughly 22 times in specialty chemicals.
• My reasonable buy price sits around $186, nearly 24% below the current price of $245.83.

WD-40, the little blue and yellow can nothing replaces

The story starts in 1953 in California, with an anti-corrosion formula developed for the aerospace industry. Water Displacement, 40th attempt: the 40th try to displace water and prevent rust. The name stuck, and so did the formula, with only minor tweaks, for more than 70 years.

What interests me as an investor is not nostalgia for the product, it is its moat, its durable competitive edge. WD-40's moat starts with the spot it occupies in the consumer's mind: when something squeaks or rusts, the reflex is to ask for WD-40, not a multi-purpose lubricant. That recognition lets it charge more than a generic product, with no extra marketing effort at each purchase.

The second pillar is distribution: WD-40 sits on the shelves of Home Depot, Walmart and their equivalents in more than 175 countries and territories, shelf space that takes a new entrant years to win. The third pillar, and the most profitable one for shareholders: WD-40 owns almost no factories. It designs the formula and the brand, then outsources manufacturing. The result is very little money to reinvest in machinery, and therefore a lot of cash left over at year end. This is what is called an asset light model, light on assets.

How I judge business quality: the grid I used on WD-40

Before talking about price, I always judge the quality of the business separately, using concrete financial criteria rather than my gut feeling about the brand. On my site, every stock gets a score out of 10 built from about ten criteria: profitability, sales growth, cash-per-share growth, buybacks, cash margin, return on invested capital, debt, and how much profit converts into cash. WD-40 scores 8 out of 10, a good score, driven by several clear strengths.

The first strength: Cash ROCE, the return on invested capital measured in cash rather than accounting profit, reaches 32% a year. In other words, every dollar the company reinvests in the business brings back 32 cents of cash a year, a level rarely seen outside companies with a very strong moat. Second strength: the free cash flow margin, the money that truly stays in the till once every bill is paid (wages, taxes, outsourcing, marketing), reaches 12% of revenue. Third point: debt is almost nonexistent, repayable in 0.67 years of cash generated, and the company buys back its own shares rather than issuing new ones.

The other side of the coin: slowing growth, margins under pressure

This picture also has its gray areas. Sales growth, 6.4% a year over five years, is judged insufficient by my grid, which looks for more than 10% a year for a company trading at this valuation. Another signal to watch: my criteria flag margin compression, with costs growing faster than revenue over the recent period, when I prefer to see the opposite. Finally, converting accounting profit into real cash runs around 95%, a notch below my 100% threshold, often a sign that working capital needs are growing a bit faster than sales.

Nothing alarming here: these are nuances, not red flags. But this is exactly why I prefer a score built on several criteria to a supposed overall judgment based on the brand: a great image does not offset growth that is hitting a ceiling.

Why is WD-40 stock so expensive today?

This is where quality and price tell two different stories. To measure what the market is willing to pay for the cash a business generates, I use the P/FCF, the ratio between the share price and the free cash flow it generates each year. A P/FCF of 10 means you are paying today for ten years of that cash; the lower the number, the cheaper the stock.

WD-40 currently trades at 43.6 times its free cash flow. For comparison, the specialty chemicals sector it belongs to shows a median P/FCF of 22 times and an average of 35.6 times across its 48 comparable companies. WD-40 sits at the 77th percentile of its sector: it is more expensive than the vast majority of its peers, including similarly sized companies with sometimes faster growth.

With these numbers, my reasonable buy price for WD-40, the one that offers a decent margin of safety given its expected growth, comes out to around $186. The stock currently trades at $245.83, an overvaluation of roughly 24% versus that target price. This is not a bubble disconnected from reality: it is the price the market accepts to pay for a nearly indestructible brand and a model that requires very little capital. But it is a price that leaves little room for error if growth disappoints.

Quality and price: here, the two stories do not match

With Adobe a few weeks ago, the situation was the opposite: an elite company that the market had pushed the price down on out of fear of AI. With WD-40, it is the reverse: a good company, not an elite one, whose price the market has pushed up out of love for the brand and its consistency.

This is the mirror image of the trap most investors know best. We usually associate overpaying with excess euphoria over a fragile company. Here, the euphoria is about a genuinely solid company, which makes it harder to spot: the high price seems justified by the quality of the brand, when it is mostly justified by the scarcity of a company this predictable in a market that is not.

What could move the stock on July 9?

In the last reported quarter (fiscal 2026's second, closed at the end of March), WD-40 slightly beat expectations: earnings per share of $1.50 against a consensus of $1.45, a small positive surprise of about 3%. For this third quarter, analyst consensus expects earnings per share of $1.59 and revenue of $176.4 million.

For the full fiscal year 2026, management targets net sales growth of 5% to 9%, between $630 million and $655 million. That is consistent with the 6.4% annual growth measured over five years by my grid, but it also confirms this is far from a company in strong acceleration. Two scenarios for July 9: a result that confirms this moderate trajectory should not move the already expensive stock much; a disappointment, on the other hand, would leave little safety cushion given the current valuation level.

The risks I keep in mind

The first risk is dependence on a handful of major retailers like Home Depot and Walmart: they carry heavy weight in sales and hold negotiating power over margins. The second is competition from cheaper generic and private-label brands nibbling at the most price-sensitive segments. The third is a growth ceiling: a brand already present in eight out of ten American homes has, by definition, less room to grow in its home market, which pushes the company toward international expansion and new categories, with success still uncertain.

How I decide, without emotion

I never mix the two questions. WD-40 is a good business: profitable, lightly indebted, able to turn capital into cash at a pace few companies match. But at $245.83, the stock trades expensive relative to its growth and its sector, and my reasonable buy price sits nearly 24% lower. Before the July 9 results, I am not positioning myself on a hunch: I set a price, and I wait for it to come to me, or for the thesis to change.

This is exactly the kind of separation between quality and price I wanted to be able to make in a few seconds for any of the more than 5,000 listed stocks, so I built a tool for it. You can check <a href='/analyse/WDFC'>the full analysis of WD-40, criterion by criterion</a>, understand <a href='/methodologie'>how I calculate the quality score and the reasonable buy price</a>, or compare WD-40 to other stocks in its sector with <a href='/screener'>my screener covering more than 5,000 stocks</a>.

FAQ

What is P/FCF, and why is WD-40's so high?

P/FCF (price to free cash flow) compares the share price to the cash the company generates each year. A P/FCF of 43.6, like WD-40's today, means you are paying for more than 43 years of that cash at the current pace. It is high because the market pays up for the brand's consistency and its low capital needs.

Is WD-40 a good long-term business?

On my quality grid, yes: it scores 8 out of 10, driven by excellent return on invested capital (32%), almost no debt, and a solid cash margin. Its sales growth, however, stays modest, around 6.4% a year over five years.

Should you buy WD-40 stock before its July 9, 2026 results?

It mostly depends on your price discipline. My reasonable buy price sits around $186, versus a current price of $245.83: the stock is roughly 24% overvalued by my method. This is not personalized investment advice, do your own research.

Why is WD-40's growth judged insufficient despite a good quality score?

Because quality and growth are two criteria among several in my grid, not the only ones. WD-40 excels on profitability and return on capital, but its sales growth (6.4% a year) stays below my 10% threshold, which weighs on the overall score without erasing it.

Is WD-40's dividend reliable?

The company has paid a dividend for decades, with a current yield of about 1.7% and average growth of 7.5% a year over five years. Its payout ratio, around 65% of profit, leaves a comfortable margin, consistent with very low debt.

Voir l'analyse WDFC sur Lubin Investment

About the author

Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I find fundamental analysis fascinating, and it has delivered excellent results. For three years now, my performance has beaten the S&P 500. But analyzing every stock took too much time: sites with incomplete data, calculation methods and criteria never aligned with mine. And spotting the best stocks was just as time-consuming, even with my own well-defined checklist. So I put my software development background to work to build this software, base my investment strategy on its results, and share it with people who share the same passion as me. It judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).