Intrinsic value of WD-40 Company - WDFC

Previous Close

$160.96

  Intrinsic Value

$67.49

stock screener

  Rating & Target

str. sell

-58%

Previous close

$160.96

 
Intrinsic value

$67.49

 
Up/down potential

-58%

 
Rating

str. sell

We calculate the intrinsic value of WDFC stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 2.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  3.80
  3.92
  4.03
  4.13
  4.21
  4.29
  4.36
  4.43
  4.48
  4.54
  4.58
  4.62
  4.66
  4.69
  4.73
  4.75
  4.78
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
Revenue, $m
  425
  441
  459
  478
  498
  519
  542
  566
  591
  618
  647
  676
  708
  741
  776
  813
  852
  893
  936
  981
  1,029
  1,079
  1,132
  1,187
  1,245
  1,306
  1,371
  1,438
  1,509
  1,584
Variable operating expenses, $m
  339
  352
  366
  380
  396
  413
  430
  449
  468
  489
  500
  523
  548
  573
  600
  629
  659
  691
  724
  759
  796
  834
  875
  918
  963
  1,010
  1,060
  1,112
  1,167
  1,225
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  339
  352
  366
  380
  396
  413
  430
  449
  468
  489
  500
  523
  548
  573
  600
  629
  659
  691
  724
  759
  796
  834
  875
  918
  963
  1,010
  1,060
  1,112
  1,167
  1,225
Operating income, $m
  85
  89
  93
  97
  102
  107
  112
  117
  123
  129
  147
  153
  160
  168
  176
  184
  193
  202
  212
  222
  233
  245
  256
  269
  282
  296
  311
  326
  342
  359
EBITDA, $m
  101
  105
  109
  114
  119
  124
  129
  135
  141
  147
  154
  161
  169
  177
  185
  194
  203
  213
  223
  234
  245
  257
  270
  283
  297
  311
  327
  343
  360
  378
Interest expense (income), $m
  3
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
Earnings before tax, $m
  81
  84
  88
  92
  96
  100
  105
  110
  115
  121
  137
  144
  150
  157
  164
  172
  180
  188
  197
  206
  216
  227
  238
  249
  261
  274
  287
  301
  315
  331
Tax expense, $m
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  37
  39
  41
  42
  44
  46
  49
  51
  53
  56
  58
  61
  64
  67
  70
  74
  77
  81
  85
  89
Net income, $m
  59
  61
  64
  67
  70
  73
  77
  80
  84
  88
  100
  105
  110
  115
  120
  125
  131
  137
  144
  151
  158
  165
  173
  182
  190
  200
  209
  220
  230
  242

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  329
  342
  356
  370
  386
  403
  420
  439
  458
  479
  501
  524
  549
  575
  602
  630
  660
  692
  726
  761
  798
  836
  877
  920
  965
  1,013
  1,063
  1,115
  1,170
  1,228
Adjusted assets (=assets-cash), $m
  329
  342
  356
  370
  386
  403
  420
  439
  458
  479
  501
  524
  549
  575
  602
  630
  660
  692
  726
  761
  798
  836
  877
  920
  965
  1,013
  1,063
  1,115
  1,170
  1,228
Revenue / Adjusted assets
  1.292
  1.289
  1.289
  1.292
  1.290
  1.288
  1.290
  1.289
  1.290
  1.290
  1.291
  1.290
  1.290
  1.289
  1.289
  1.290
  1.291
  1.290
  1.289
  1.289
  1.289
  1.291
  1.291
  1.290
  1.290
  1.289
  1.290
  1.290
  1.290
  1.290
Average production assets, $m
  92
  95
  99
  103
  108
  112
  117
  122
  128
  134
  140
  146
  153
  160
  168
  176
  184
  193
  202
  212
  222
  233
  244
  256
  269
  282
  296
  311
  326
  342
Working capital, $m
  59
  61
  63
  66
  69
  72
  75
  78
  82
  85
  89
  93
  98
  102
  107
  112
  118
  123
  129
  135
  142
  149
  156
  164
  172
  180
  189
  198
  208
  219
Total debt, $m
  93
  99
  106
  114
  122
  130
  139
  149
  159
  169
  180
  192
  205
  218
  232
  246
  262
  278
  295
  313
  332
  351
  372
  394
  417
  441
  467
  493
  522
  551
Total liabilities, $m
  168
  174
  181
  189
  197
  205
  214
  224
  234
  244
  256
  267
  280
  293
  307
  321
  337
  353
  370
  388
  407
  427
  447
  469
  492
  516
  542
  569
  597
  626
Total equity, $m
  161
  168
  174
  182
  189
  197
  206
  215
  225
  235
  246
  257
  269
  282
  295
  309
  324
  339
  356
  373
  391
  410
  430
  451
  473
  496
  521
  546
  573
  602
Total liabilities and equity, $m
  329
  342
  355
  371
  386
  402
  420
  439
  459
  479
  502
  524
  549
  575
  602
  630
  661
  692
  726
  761
  798
  837
  877
  920
  965
  1,012
  1,063
  1,115
  1,170
  1,228
Debt-to-equity ratio
  0.570
  0.590
  0.610
  0.630
  0.640
  0.660
  0.680
  0.690
  0.710
  0.720
  0.730
  0.750
  0.760
  0.770
  0.790
  0.800
  0.810
  0.820
  0.830
  0.840
  0.850
  0.860
  0.870
  0.870
  0.880
  0.890
  0.900
  0.900
  0.910
  0.920
Adjusted equity ratio
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  59
  61
  64
  67
  70
  73
  77
  80
  84
  88
  100
  105
  110
  115
  120
  125
  131
  137
  144
  151
  158
  165
  173
  182
  190
  200
  209
  220
  230
  242
Depreciation, amort., depletion, $m
  16
  16
  16
  17
  17
  17
  17
  18
  18
  18
  8
  8
  8
  9
  9
  10
  10
  10
  11
  12
  12
  13
  13
  14
  15
  15
  16
  17
  18
  19
Funds from operations, $m
  75
  77
  80
  83
  87
  90
  94
  98
  102
  106
  108
  113
  118
  123
  129
  135
  141
  148
  155
  162
  170
  178
  187
  196
  205
  215
  225
  236
  248
  260
Change in working capital, $m
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  10
  10
Cash from operations, $m
  73
  75
  78
  81
  84
  87
  91
  94
  98
  103
  104
  109
  114
  119
  124
  130
  136
  142
  149
  156
  163
  171
  179
  188
  197
  207
  217
  227
  238
  250
Maintenance CAPEX, $m
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -12
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
  -18
New CAPEX, $m
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
Cash from investing activities, $m
  -9
  -9
  -9
  -9
  -10
  -11
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -17
  -17
  -18
  -19
  -19
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -32
  -34
Free cash flow, $m
  64
  67
  69
  71
  74
  77
  80
  83
  86
  90
  91
  95
  99
  103
  108
  113
  118
  123
  129
  135
  142
  148
  155
  163
  171
  179
  187
  196
  206
  216
Issuance/(repayment) of debt, $m
  6
  7
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  6
  7
  7
  7
  8
  8
  9
  9
  10
  11
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
Total cash flow (excl. dividends), $m
  71
  73
  76
  79
  82
  85
  89
  92
  96
  100
  102
  106
  111
  116
  122
  127
  133
  140
  146
  153
  160
  168
  176
  185
  194
  203
  213
  223
  234
  245
Retained Cash Flow (-), $m
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -28
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  65
  67
  69
  72
  74
  77
  80
  83
  87
  90
  91
  95
  99
  104
  108
  113
  119
  124
  130
  136
  142
  149
  156
  164
  171
  180
  188
  197
  207
  217
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  62
  61
  60
  59
  58
  56
  54
  52
  50
  47
  43
  41
  38
  35
  32
  29
  26
  23
  20
  17
  15
  12
  10
  8
  7
  5
  4
  3
  2
  2
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

WD-40 Company is a global company engaged in developing and selling products, which solve problems in workshops, factories and homes. The Company's segments include the Americas; Europe, Middle East and Africa (EMEA), and Asia-Pacific. The Company's Americas segment includes the United States, Canada and Latin America. The EMEA segment includes countries in Europe, the Middle East, Africa and India. The Asia-Pacific segment includes Australia, China and other countries in the Asia region. The Company has two product groups, which include maintenance products and homecare and cleaning products. As of August 31, 2016, the Company marketed and sold its products in more than 176 countries and territories around the world primarily through mass retail and home center stores, warehouse club stores, grocery stores, hardware stores, automotive parts outlets, sport retailers, independent bike dealers, online retailers and industrial distributors and suppliers.

FINANCIAL RATIOS  of  WD-40 Company (WDFC)

Valuation Ratios
P/E Ratio 42.5
Price to Sales 5.9
Price to Book 16.2
Price to Tangible Book
Price to Cash Flow 43.3
Price to Free Cash Flow 70.3
Growth Rates
Sales Growth Rate 0%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 400%
Cap. Spend. - 3 Yr. Gr. Rate 27.2%
Financial Strength
Quick Ratio 6
Current Ratio 0.1
LT Debt to Equity 96.4%
Total Debt to Equity 110.8%
Interest Coverage 26
Management Effectiveness
Return On Assets 15.5%
Ret/ On Assets - 3 Yr. Avg. 15%
Return On Total Capital 19.1%
Ret/ On T. Cap. - 3 Yr. Avg. 18.7%
Return On Equity 38%
Return On Equity - 3 Yr. Avg. 33.7%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 56.2%
Gross Margin - 3 Yr. Avg. 55.1%
EBITDA Margin 22.3%
EBITDA Margin - 3 Yr. Avg. 20.7%
Operating Margin 19.9%
Oper. Margin - 3 Yr. Avg. 18.7%
Pre-Tax Margin 19.7%
Pre-Tax Margin - 3 Yr. Avg. 18.5%
Net Profit Margin 13.9%
Net Profit Margin - 3 Yr. Avg. 13.2%
Effective Tax Rate 29.3%
Eff/ Tax Rate - 3 Yr. Avg. 28.4%
Payout Ratio 50.9%

WDFC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WDFC stock intrinsic value calculation we used $409 million for the last fiscal year's total revenue generated by WD-40 Company. The default revenue input number comes from 0001 income statement of WD-40 Company. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our WDFC stock valuation model: a) initial revenue growth rate of 3.8% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for WDFC is calculated based on our internal credit rating of WD-40 Company, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of WD-40 Company.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of WDFC stock the variable cost ratio is equal to 80%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for WDFC stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for WD-40 Company.

Corporate tax rate of 27% is the nominal tax rate for WD-40 Company. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the WDFC stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for WDFC are equal to 21.6%.

Life of production assets of 18.4 years is the average useful life of capital assets used in WD-40 Company operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for WDFC is equal to 13.8%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $155.489 million for WD-40 Company - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 13.841 million for WD-40 Company is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of WD-40 Company at the current share price and the inputted number of shares is $2.2 billion.

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