Measuring WD-40 Company's (NasdaqGS:WDFC) track record of past performance is an insightful exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess WDFC's recent performance announced on 31 August 2019 and compare these figures to its historical trend and industry movements.
Was WDFC's weak performance lately a part of a long-term decline?
WDFC's trailing twelve-month earnings (from 31 August 2019) of US$56m has declined by -14% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 8.9%, indicating the rate at which WDFC is growing has slowed down. What could be happening here? Well, let’s take a look at what’s occurring with margins and if the rest of the industry is facing the same headwind.
In terms of returns from investment, WD-40 has invested its equity funds well leading to a 38% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 19% exceeds the US Household Products industry of 6.9%, indicating WD-40 has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for WD-40’s debt level, has increased over the past 3 years from 25% to 36%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 58% to 56% over the past 5 years.
What does this mean?
Though WD-40's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have capricious earnings, can have many factors influencing its business. You should continue to research WD-40 to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for WDFC’s future growth? Take a look at our free research report of analyst consensus for WDFC’s outlook.
- Financial Health: Are WDFC’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 August 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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