WDFC

WD-40 is exactly the kind of business long-term investors covet: a globally recognized consumer-industrial brand throwing off a 55.1% gross margin, 33.9% ROE, and $87.9M of operating cash flow on $620M of revenue. FY2025 was the best year in the five-year series shown — revenue grew 5.0% to $620M while net income jumped 30.7% to $91.0M and diluted EPS rose 30.9% to $6.69, suggesting meaningful operating leverage and likely relief from the input-cost pressure that compressed earnings during FY2022-FY2024 (net income was essentially flat at ~$66-70M for three straight years before this breakout). The balance sheet is in great shape: $58.1M cash, equity up 16.3% to $268M, liabilities down 5.0%, and a benign 0.77x liabilities/equity. Capital return is steady — $50.3M dividends and $12.3M buybacks — and the Board's 7% dividend hike to $0.94/quarter in December 2024 signals management confidence.

The problem is price. At $244.08 the stock trades at 36.5x trailing EPS and 5.3x sales for a business that has compounded revenue at roughly 6% annually over five years (FY2021 $488M → FY2025 $620M). FY2025's earnings jump came largely from margin expansion (gross profit +8.3%, operating income +7.7%, net income +30.7%), and the gap between operating-income growth and net-income growth suggests below-the-line items (tax, FX, or other) did some heavy lifting — that's not a base you should annualize. Strip those out and you're paying a premium multiple for a high-single-digit earner.