WD-40 (WDFC) Following Cost Pressures And Supply Disruptions Still Looks Undervalued
WD-40 (WDFC) is back in focus after its latest quarterly results, where higher input costs and supply disruptions linked to the Iran war have raised fresh questions for investors about future profitability.
See our latest analysis for WD-40.
WD-40’s share price fell 2.9% on the day of the earnings update and is down 4.7% over the past week, but a 21.8% year to date share price return and 13.4% 1-year total shareholder return suggest momentum has generally been positive over a longer stretch.
If input cost pressures and supply chain risks have you reassessing your watchlist, this could be a useful moment to look beyond WD-40 and uncover 18 top founder-led companies
So is WD-40’s recent pullback a signal that rising costs are starting to bite into the business, or simply a reset after a strong run that reflects changing sentiment more than fundamentals? The valuation section is where that tension shows up most clearly.
Most Popular Narrative: 11.8% Undervalued
Against WD-40's last close at $239.59, the most followed narrative pegs fair value at about $271.67, so the gap between price and model assumptions matters.
The company's focus on premiumization of products, with targets for a compound annual growth rate for premium products exceeding 10%, is poised to improve net margins by shifting the product mix towards higher-margin offerings.
WD-40’s strategy to divest its less profitable home care and cleaning brands is expected to position the company as a higher growth and higher gross margin enterprise, ultimately boosting operational margins and net margins once complete.
Want to understand why this WD-40 narrative backs a higher fair value even with lower future margins baked in and a richer earnings multiple at the end of the forecast period? The key is how revenue growth, mix shift toward maintenance products, and assumed profitability interact to support that pricing power story without relying on rapid earnings expansion.
Result: Fair Value of $271.67 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, higher input costs pressuring margins and uncertainty around divesting WD-40’s lower margin home care and cleaning business could still upset this fair value narrative.
Find out about the key risks to this WD-40 narrative.
Another View: WD-40 Looks Expensive On Earnings
Against the narrative fair value of $271.67, WD-40 screens as expensive on its current P/E of 36.1x versus a fair ratio of 13.5x, the global Household Products industry at 17x and peers at 18.6x, which points to meaningful valuation risk if sentiment cools.
For a closer look at what these earnings-based gaps might mean over time, including how they could close, See what the numbers say about this price — find out in our valuation breakdown.
Next Steps
If the mixed signals around WD-40 have you unsure what to think, take a moment to review the positives for yourself and weigh them against the risks, then see how those potential rewards stack up in the 2 key rewards
Looking for more investment ideas beyond WD-40?
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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