Financial Report Analysis: WD 40 CO (WDFC)

1. Executive Summary

• Current financial position: WD 40 CO demonstrates a strong financial position with increasing revenue and profitability.
• Key findings:
  • Revenue growth: $139.1 million (Q2 2025) vs. $146.1 million (current period, exact dates not specified but presumably the full year or another relevant period)
  • Net income growth: $15.536 million (Q2 2024) vs. $29.851 million (current period)
  • Strong cash position: $52.995 million cash and cash equivalents as of Feb 28, 2025
• Overall financial trend: Positive

2. Profitability Analysis

• Revenue trend: Revenue has grown from $139.1 million (Q2 2024) to $146.1 million (current period), representing a 5% increase.
• Profit trend: Net income has significantly increased from $15.536 million (Q2 2024) to $29.851 million (current period), representing a 92% increase.
• Profit margins:
  • Gross margin: 52.5% ($72.941 million / $139.1 million) in Q2 2024 vs. 54.6% ($79.716 million / $146.1 million) in the current period
  • Operating margin: 15.1% ($20.941 million / $139.1 million) in Q2 2024 vs. 15.9% ($23.28 million / $146.1 million) in the current period
• Operating efficiency: Selling, General, and Administrative (SG&A) expenses have increased from $45.023 million (Q2 2024) to $48.988 million (current period), but as a percentage of revenue, they've decreased slightly from 32.4% to 33.5%, indicating relatively stable operating efficiency.

3. Balance Sheet Strength

• Assets: Total assets have increased from $449.039 million (Aug 31, 2024) to $458.262 million (Feb 28, 2025).
• Liabilities: Total liabilities have decreased from $218.513 million (Aug 31, 2024) to $216.12 million (Feb 28, 2025).
• Equity: Stockholders' equity has increased from $230.526 million (Aug 31, 2024) to $242.142 million (Feb 28, 2025).
• Liquidity: Cash and cash equivalents have increased from $46.699 million (Aug 31, 2024) to $52.995 million (Feb 28, 2025), indicating strong liquidity.
• Solvency: The debt-to-equity ratio is relatively low, with total debt ($30.745 million current + $84.406 million non-current = $115.151 million) compared to stockholders' equity ($242.142 million), indicating a healthy solvency position.

4. Cash Flow Assessment

• Operating cash flow: $22.908 million (Q2 2025) vs. $44.892 million (Q2 2024), indicating a decrease in operating cash generation.
• Investing cash flow: -$1.8 million (Q2 2025) vs. -$1.743 million (Q2 2024), showing consistent investment in property, plant, and equipment.
• Financing cash flow: -$12.633 million (Q2 2025) vs. -$35.589 million (Q2 2024), primarily driven by dividend payments and share repurchases.
• Cash generation capability: The company has a strong ability to generate cash from operations, although it has decreased compared to the same period last year.

5. Growth and Investment

• Capital expenditures: $2.057 million (Q2 2025) vs. $2.092 million (Q2 2024), indicating consistent investment in property, plant, and equipment.
• R&D investments: Not explicitly stated, but the company has been investing in intangible assets, as evidenced by the amortization of intangible assets ($44,000 in the current period).
• Growth trajectory: The company has demonstrated revenue and net income growth, indicating a positive growth trajectory.

6. Risk Factors

• Key financial risks:
  • Dependence on a few large customers or markets (not explicitly stated but a potential risk)
  • Foreign currency transaction gains/losses (e.g., -$658,000 in Q2 2025)
  • Changes in tax laws or regulations (e.g., tax benefit from release of uncertain tax position: -$11.929 million in Q2 2025)
• Concerning trends: Decrease in operating cash flow and increase in accounts receivable and inventory.

7. Valuation Context

• P/E ratio: Based on the stock price ($199.0) and EPS ($2.19 diluted), the P/E ratio is approximately 90.9.
• P/S ratio: Based on the stock price ($199.0) and revenue per share (not directly available), the P/S ratio can be calculated using the market cap and revenue. Market cap is not directly available, but using the number of diluted shares (13.572 million) and stock price, we can estimate it as approximately $2.7 billion. The P/S ratio is then $2.7 billion / $146.1 million (revenue) ≈ 18.5.
• Historical comparison: Without historical valuation data, it's challenging to assess whether the current valuation is reasonable.

8. Key Considerations

• Key factors for investors to consider:
  • The company's strong revenue and net income growth trajectory.
  • The potential risks associated with foreign currency transactions and changes in tax laws or regulations.
  • The relatively high valuation multiples (P/E and P/S), which may indicate a premium valuation.
• Potential strengths: Strong cash position, healthy solvency, and consistent investment in property, plant, and equipment.
• Challenges: Decrease in operating cash flow, potential dependence on a few large customers or markets, and foreign currency transaction risks.