Business Description

WD-40 Company operates as a consumer products company. The company markets multi-purpose maintenance products, WD-40 multi-use product, and 3-IN-ONE Oil, BLUE WORKS, and WD-40 Specialist product lines.

WD-40 products have various consumer uses in household, marine, automotive, construction, repair, sporting goods, and gardening applications, in addition to industrial applications. WD-40 Company manufactures and markets multi-purpose lubricant products and heavy-duty hand cleaners.  The Company's WD-40 acts as a lubricant, rust preventative, penetrant, cleaner, and moisture displacer.  WD-40's 3-IN-ONE Oil is a drip oil lubricant that allows precise application. The Company also manufactures Lava heavy-duty hand cleaner and other household cleaning products.

Positives

• Low Capex Business (less than 1% of revenue in last 5 years)
• Strong brand image and quality of product
• Literally the whole business is a cash cow, generating lots of cash
• Company buying back shares
• Constantly increasing dividend since last 4-5 years atleast. (Dividend yield of 2%)
• Very steady earnings with good cash generation

Negatives

• Growth looks to be saturated in US (no further scope high growth in US)
• Raw material prices are linked to oil. Gross margins took a hit in 2007-08 which fell to 47-48% levels when oil price peaked, when compared to average gross margin of around 50%.

Competitors

Clorox, Church & Dwight, B’laster Corporation

Earnings Growth Driver

Expansion into emerging markets (Asia, Africa, and Middle East) to drive growth where concept of helper still exists when compared to western countries where people tend to do almost all household work by themselves.

Revenues by Geographic Segment

Americas - 49%

EMEA - 37%

Asia Pacific - 14%

*Share of Americas has been gradually decreasing in the recent years.

Summary

The company has simple business model with good brand image. All of the revenue is recurring given the nature of product and its applications. There will always be need for lubricants, rust cleaner/prevention, cleaning, etc.

Valuations

Current valuations are not attractive given the earnings growth rate.