How is a legend forged? WD-40—the 'Universal Lubricant'—exemplifies both the glory and the challenges of a blockbuster consumer product.

One trick, and you rule the world. In the fields of repair and DIY, WD-40 is regarded as a universal little blue bottle. Much like how Cantonese people view herbal tea—as a cure-all for any physical discomfort, inflammation, headache, or itch—WD-40’s applications are seemingly boundless: from fixing common joystick drift issues in Nintendo Switch game consoles, to unsticking jammed windows in Ford Focus automobiles, to dusting and cleaning components of DJI drones. Seventy years after its launch, WD-40 Company (WDFC.O) remains deliberately vague about WD-40’s actual efficacy—and even actively encourages outlandish anecdotes. For instance, its official website claims a user once successfully drove away a python hiding under their car using WD-40. This aura of mystery surrounding WD-40’s formula and function has fostered niche user communities dedicated to exploring its myriad uses—and even inspired near-fanatical devotion among some users. From rocket maintenance to lubrication magic: stable operations Product-wise, WD-40 Company relies on its flagship WD-40 Multi-Use Product to keep industrial gears running smoothly worldwide. Financially, over the past 40 years, the company’s revenue and net income have shown generally smooth growth. While quarterly figures fluctuate, annual performance has remained relatively steady, with no pronounced volatility. In fiscal year 2023, the company reported $537 million in revenue, up 3.55% year-on-year; gross margin rose to 51.04%, up from 49.1% in the prior fiscal year. However, net income encountered some friction: it declined 1.98% year-on-year to $66 million. (Note: The company’s most recent full fiscal year ran from August 31, 2022, to August 31, 2023. To align with the company’s reporting convention, this period is referred to herein as FY2023 (equivalent to the fiscal year); other fiscal years follow accordingly. Unless otherwise specified, all monetary values in this article are in U.S. dollars.) (Source: FENGYUN Market Value App) The FY2023 revenue growth was primarily driven by a significant increase in Q3 revenue (+14.6% year-on-year). During that quarter, revenue rose across all regions. First, revenue in the Americas grew 16% year-on-year, mainly due to a 21% year-on-year increase in maintenance product sales in the United States—driven largely by higher selling prices. However, unit sales declined, partially offsetting the revenue boost from price increases. In Latin America, maintenance product revenue rose 18% year-on-year, primarily because wholesale customers anticipated future price hikes and thus increased bulk purchases. Additionally, the company’s direct operations in Mexico posted revenue growth, attributable to two factors: rising product prices and favorable exchange-rate effects stemming from the U.S. dollar’s appreciation. Although oil-sector activity in western Canada rebounded year-on-year, boosting industrial demand for the company’s products, overall weak demand across Canada led to a 23% year-on-year decline in maintenance product revenue.

(30) 'Real Records of Value Investing': Case Study of a Business with an Economic Moat—WD-40: A Retrospective on the Investment

(Long-term sustainability is questionable), so assuming a 20% tax rate is appropriate for estimation purposes. ・Estimated 2018 profitability: $62 million ($409 million × 19% × 80% post-tax) ・Assume profits are either distributed to shareholders or reinvested aggressively (excluding organic growth portion); such aggressive reinvestment yields returns equal to WD-40’s cost of capital. ・Organic growth: ・Aligned with broader macroeconomic trends: as economic growth slows in both developed and developing countries, organic growth has declined from 4% annually to 3%. ・At a 3% organic growth rate, WD-40’s sales growth should amount to $12.3 million annually ($409 million × 3%). ・Since each additional dollar of revenue requires $0.15 in net investment, $2 million in retained earnings is needed to support organic growth. ・Thus, the remaining $60 million in sustainable earnings can be distributed to investors. ・As of September 30, 2018, the acquisition cost of WD-40’s core business comprised $2.392 billion in equity ($172.10 × 13.9 million shares) plus $37 million in net debt, resulting in a total enterprise value of $2.429 billion. ・The $60 million in sustainable annual distributions to shareholders equates to a 2.5% cash yield ($60 million ÷ $2.429 billion). ・Total return = 3% organic return + 2.5% cash yield (aggressive reinvestment is negligible).

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WD-40 Co. reported Q4 EPS of $1.06, missing analyst estimates by $0.08, though revenue exceeded consensus at $176.8 million. FY2027 guidance aligns with current market expectations.

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