3 Reasons WDFC is Risky and 1 Stock to Buy Instead

Over the last six months, WD-40’s shares have sunk to $201.77, producing a disappointing 11.5% loss - a stark contrast to the S&P 500’s 11.7% gain. This may have investors wondering how to approach the situation.

Is there a buying opportunity in WD-40, or does it present a risk to your portfolio? Get the full stock story straight from our expert analysts, it’s free for active Edge members.

Why Is WD-40 Not Exciting?

Even with the cheaper entry price, we don't have much confidence in WD-40. Here are three reasons why WDFC doesn't excite us and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Regrettably, WD-40’s sales grew at a mediocre 6.1% compounded annual growth rate over the last three years. This was below our standard for the consumer staples sector.

2. Fewer Distribution Channels Limit its Ceiling

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.

3. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect WD-40’s revenue to rise by 4.1%, a slight deceleration versus This projection is underwhelming and indicates its products will face some demand challenges.

Final Judgment

WD-40’s business quality ultimately falls short of our standards. After the recent drawdown, the stock trades at 33.6× forward P/E (or $201.77 per share). This multiple tells us a lot of good news is priced in - you can find more timely opportunities elsewhere. We’d recommend looking at the most entrenched endpoint security platform on the market.

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