How is a legend forged? WD-40—the 'universal lubricant'—epitomizes the glory and challenges of a blockbuster consumer product.

One trick, and you rule them all. In the fields of repair and DIY, WD-40 is regarded as a universal little blue bottle. Just as Cantonese people view herbal tea—as a cure-all for any physical discomfort, inflammation, headache, or itch—WD-40’s applications are equally all-encompassing: from resolving 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), the firm behind the product, 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 beneath 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 enthusiasts. From rocket maintenance to lubrication magic: stable operations Product-wise, WD-40 Company keeps industrial gears running smoothly worldwide with its flagship WD-40 Multi-Use Product. Financially, over the past 40 years, the company’s revenue and net income have shown smooth overall growth. While quarterly figures fluctuate, annual performance has remained relatively steady, without pronounced volatility. In fiscal year 2023 (ending August 31, 2023), the company reported $537 million in revenue, up 3.55% year-on-year; gross margin improved to 51.04%, up from 49.1% in the prior fiscal year. However, net income encountered some friction: it declined by 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 amounts herein are in U.S. dollars.) (Source: Fincy App) 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 increased sales of maintenance products in the U.S. (+21% year-on-year). This growth was largely price-driven; however, lower unit volumes partially offset the revenue uplift from higher prices. In Latin America, maintenance-product revenue rose 18% year-on-year, primarily because wholesale customers—anticipating future price hikes—increased bulk purchases. Additionally, the company’s direct business in Mexico posted revenue growth, attributable to two factors: rising product prices and exchange-rate effects stemming from the U.S. dollar’s appreciation. Although the Western Canadian oil industry saw a rebound in activity compared to the prior year—boosting industrial demand for the company’s products—overall weakening demand in Canada led to a 23% year-on-year decline in maintenance-product revenue.

(28) 'Real Records of Value Investing': Case Study of Companies with Economic Moats—WD-40-1 Growth Value Analysis

After adjusting for excessive depreciation and one-time expenses in 1994, average annual net profit stood at $21 million. ・Net cash balance remained essentially unchanged; thus, the 86% dividend payout ratio was fully funded by earnings—and is sustainable. ・Therefore, the cash return calculation is approximately 5.7% × 86%, equaling 5%. ・(2) Returns from Growth ・Organic Growth Return: Revenue and profit growth arising organically from WD-40’s existing product lines, distribution arrangements, and productivity improvements. ・First, examine WD-40’s nominal revenue and inflation data, then compute real revenue. ・Focus on the fundamental drivers of WD-40’s revenue growth: ・(1) A sharp rise in exports to emerging economies—thus, growth is not constrained by sluggishness in developed economies such as Europe and North America. ・(2) WD-40 appeals across all household income levels, making it resilient to worsening income inequality. ・(3) WD-40 is a product—not a service—and therefore is unaffected by the global consumption trend shifting from goods to services. ・Combining the above factors, future demand growth for WD-40 is expected to slightly lag global GDP growth. Since 1998, projected global GDP growth stands at 5% annually (comprising 1.5% population growth and 3.5% global productivity growth); WD-40’s real growth rate is likely ~4%. ・Global inflation is expected to remain around 1.5%, implying nominal GDP growth of ~6–6.5% annually—corresponding to a maximum demand growth of ~4.5% for WD-40. ・Assuming a modest, permanent decline in margins before 1998, a 4% organic growth rate is reasonable. ・WD-40’s organic growth investment composition: working capital ・WD-40 outsources all manufacturing and distribution. ・Accounts receivable and inventory together represent 20% of sales, partially offset by accounts payable and accrued liabilities totaling 6% of sales. ・Thus, each additional $1 of sales requires an incremental $0.14 of net working capital. ・In 1998, sales totaled $144 million; at a 4.5% growth rate, sales increased by $6.5 million, requiring roughly $1 million ($6.5 million × 14%) in additional net working capital—equivalent to 4.5% of the $21 million in sustainable profit recorded that year. ・If 86% of earnings continue to be distributed to shareholders, and 4.5% of earnings are needed to fund organic growth, then approximately 10% of earnings remain available for active reinvestment. ・In summary: a 5% cash return, plus 4% annual value growth from organic growth, totals 9%—while leaving ~10% of earnings available for further value creation via active reinvestment. ・Return on Active Reinvestment: Returns generated by active reinvestment initiatives ・Amount allocated to active reinvestment: ・Based on the above analysis, after allocating $19 million (86% of $22 million) to shareholders and reserving $1 million to support organic growth, the remaining $2 million of sustainable earnings is earmarked for active reinvestment.

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WD-40 Company reported Q3 2026 sales of $176.8 million, exceeding revenue expectations by 8.1% year-on-year, driving a 5.6% stock increase despite missing GAAP profit estimates.

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