Over the past six months, WD-40’s shares (currently trading at $244) have posted a disappointing 5.3% loss, well below the S&P 500’s 1.9% gain. This was partly driven by its softer quarterly results and might have investors contemplating their next move.
Is there a buying opportunity in WD-40, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is WD-40 Not Exciting?
Even with the cheaper entry price, we're sitting this one out for now. Here are three reasons why we avoid WDFC and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last three years, WD-40 grew its sales at a mediocre 5.7% compounded annual growth rate. This was below our standard for the consumer staples sector. 
2. Fewer Distribution Channels Limit its Ceiling
With $610.6 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.
3. Free Cash Flow Margin Dropping
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.
As you can see below, WD-40’s margin dropped by 10 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 margin for the trailing 12 months was 10.8%.
Final Judgment
WD-40 isn’t a terrible business, but it doesn’t pass our bar. Following the recent decline, the stock trades at 42.4× forward P/E (or $244 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better stocks to buy right now. We’d recommend looking at one of Charlie Munger’s all-time favorite businesses.
Stocks We Like More Than WD-40
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
