What kind of company is this?
WD-40 (ticker: WDFC), the company’s main product is WD-40, which is nicknamed the “Little Blue Can”. It can be said to be the “magic oil” for large and small mechanical supplies and precision electrical instruments. It is a universal maintenance agent for metal products. It cures all diseases and integrates six functions of rust prevention, dehumidification, rust removal, lubrication, cleaning and conductivity. Mostpeople who have repaired things with their hands must have used this product.
Origin of the product
It was originally invented for military purposes. The founder, Norm Larsen, after 40 failed attempts to adjust the formula, finally invented the most perfect formula for the 40th time, and used the name written on the experimental record “Water Displacement, 40th formula” named the product, its abbreviation is WD-40, and it has also become the name of the company.
Formula is a trade secret
Like Coca-Cola (ticker: KO), its formula is a trade secret and not made public. It was originally invented to be used as a water-repellent agent to prevent the rocket casing from rusting and corroding. It was later found to be surprisingly good for lubricating and reducing mechanical noise, rust resistance, and glue remover. This product has been very popular until now, and no real rival product has appeared so far.
In the 2-3 sections of the book “The Rules of Super Growth Stocks Investing”, I mentioned intellectual property rights; intellectual property rights (Intellectual Property, IP) are the so-called intellectual property rights, which regulate that others may not use them arbitrarily without authorization. It is also a legal guarantee. But trade secrets are an intangible asset more competitive than registered intellectual property, the highest of all moats. Because it will not be published, no one in the outside world knows the secret recipe, and there is no way to copy it if you want to copy it.
Why discuss this company?
I wrote an article before, “Discovering the Possibilities of Super Growth Stocks in the Private Manufacturing Industry“, with the intention of most of the high-paying stocks in recent decades have been tech stocks, but that doesn’t mean there aren’t super-growth stocks in non-tech sectors, or good companies worthy of investors. My blog also discusses many good non-tech stocks, and interested readers can go back and review them one by one.
The company has a market capitalization of less than $3 billion, stable profits, a stock price reward that exceeds your expectations, and with regular dividends. It mainly relies on WD-40, and it is not a necessity for people’s livelihood, nor is it a high-tech product. It is an industrial preparation that ordinary people despise and use; this really subverts most people’s views, which is also my Reasons specially selected for your reference.
This kind of small company that seems to get dirty hands, no one wants to touch, and is easily despised, is Peter Lynch specifically points out a good investment target in his book. Because no one pays attention, everyone avoids it. Many companies with prejudice or preconceived ideas might be a good investment targets.
What was the performance of the past year?
| FY 2021 | US$ million | Annual growth |
| Revenue | 488.109 | +19.5% |
| Net income | 70.229 | +15.68% |
| Gross margin | 54% | -100 bps |
| EBITDA | 95.832 | +12% |
What is its market valuation?
The following is the valuation of this company in the market by investors:
| Index | Number |
| Market capitalization | 2.65 billion |
| Stock price | 193.42 |
| P/E | 40.94 |
| P/S | 5.31 |
| Revenue growth rate | 19.49% |
| ROE | 32.9% |
| Net margin | 13% |
The revenue growth rate, ROE, and net profit margin in the table above are based on the company’s 2021 financial report data. Stock price, market capitalization, P/E ratio, P/S ratio are calculated until 3/16/2022.
What is its long-term return rate?
Its shares have risen 1,220% over the past 20 years. This means that its annualized rate of return is 13.32%, which means that investing in it will double your investment in 5.4 years. During the same period, the annualized return of the S&P 500, which represents the U.S. stock market, was 7.38%. Maybe you think it’s okay (investors with such thoughts are actually very dangerous), but I want to let you know that most of the well-known companies in the US stock market that you know have a lower return on investment, and you have to worry about that day, because competitors might take the market tomorrow, but WD-40 has no competitors.
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