WDFC 251.3 (+2.49%)
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Last update on 2024-06-07

WD-40 (WDFC) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

WD-40 (WDFC) achieves a Piotroski F-Score of 7/9 in 2023, signaling strong financial health across profitability, liquidity, and operational efficiency metrics.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 7

We're running WD-40 (WDFC) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
0
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
0
Current Ratio is growing?
1
Number of shares not diluted?
1
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
1

The Piotroski F-Score for WD-40 (WDFC) is 7 out of 9, which shows that the company has a relatively strong financial position. WD-40 demonstrates positive net income and cash flow from operations, indicating consistent profitability and operational efficiency. Despite a minor decrease in the Return on Assets and a slight increase in leverage, the company's current ratio and strict management of shares outstanding reflect healthy liquidity and a commitment to shareholder value. Improvements in gross margin and asset turnover ratio show efficient cost management and effective use of assets respectively.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score analysis, WD-40 (WDFC) appears to be a robust investment opportunity. With a score of 7, the company shows solid profitability, effective use of assets, and good liquidity. The minor decline in ROA and slight rise in leverage don't outweigh the consistent positive performance in other critical areas. Therefore, potential investors may find WD-40 a worthwhile stock to consider for its stability and growth potential.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of WD-40 (WDFC)

Company has a positive net income?

Net income represents a company's total earnings or profit. For the Piotroski score, a positive net income is crucial as it indicates overall profitability.

Historical Net Income of WD-40 (WDFC)

For 2023, WD-40 (WDFC) reported a net income of $65,993,000. This is indeed a positive value, adding 1 point to the Piotroski score for this criterion. Analyzing the last 20 years of net income, WD-40 shows a consistent trend of profitability, ranging from $25.6 million in 2004 to $70.2 million in 2021. Although there have been minor fluctuations, the trend is predominantly upward, which presents a positive outlook on the company's ability to generate profit consistently over time.

Company has a positive cash flow?

Assessing cash flow from operations (CFO) is vital as it indicates if a company can generate sufficient cash to maintain and grow its operations. If positive, it adds credibility to the company’s financial health.

Historical Operating Cash Flow of WD-40 (WDFC)

In 2023, WD-40 (WDFC) generated a positive cash flow from operations amounting to $98,391,000. Given this figure, WD-40 clearly demonstrates robust operational efficiency. Over the past 20 years, the company has witnessed fluctuating CFO values, peaking at $98,391,000 in 2023. The consistent upward trajectory, particularly the surge from $2,604,000 in 2022 to $98,391,000 in 2023, highlights significant operational improvements. This trend bodes well for WD-40, reinforcing investor confidence. Adding 1 point based on this result is justified.

Return on Assets (ROA) are growing?

Change in ROA assesses the profitability relative to total assets year-over-year. A positive trend indicates increasing efficiency in generating profits.

Historical change in Return on Assets (ROA) of WD-40 (WDFC)

For WD-40, the ROA decreased from 0.1558 in 2022 to 0.1513 in 2023, hence no point is added for this criterion. Though slightly declining, WD-40’s ROA remains aligned with its recent performance history and is notably lower than the industry median of 0.3018 for 2023, highlighting a need for operational efficiency improvements.

Operating Cashflow are higher than Netincome?

Discussing the significance of why having a higher operating cash flow than net income is a positive sign, reflecting a company's robust cash-generating capability and indicating lower earnings manipulation.

Historical accruals of WD-40 (WDFC)

In 2023, WD-40 exhibited an operating cash flow of $98,391,000 compared to a net income of $65,993,000. This differential suggests robust operational efficiency, ensuring they generate sufficient cash from core business activities to cover expenses and grow. In comparison to past years, this is a significantly strong position, given the cash flow trends and accruals over two decades. The consistent positive cash flow points towards sustainable financial health. Therefore, WD-40 earns 1 point for this criterion.

Liquidity of WD-40 (WDFC)

Leverage is declining?

Change in leverage assesses whether a company has improved its capital structure by reducing its dependency on debt financing, an essential metric for financial stability.

Historical leverage of WD-40 (WDFC)

WD-40's leverage ratio has slightly increased from 0.2605 in 2022 to 0.2639 in 2023. While this is a minimal change, it does still mean that the company is slightly more reliant on debt compared to equity this year, which could indicate a marginal decrease in financial stability. Examining historical trends, WD-40 significantly reduced its leverage from 2003 to 2010, reaching zero. A spike occurred again in 2015, where levels have largely remained more elevated compared to pre-2015 figures, showing a fluctuating approach to debt management, reflective of different strategic choices over the years.

Current Ratio is growing?

The current ratio measures a company's ability to cover its short-term obligations with its short-term assets. It is a crucial indicator of liquidity health.

Historical Current Ratio of WD-40 (WDFC)

For WD-40, the current ratio increased from 2.2527 in 2022 to 2.7974 in 2023. This increase suggests that the company's liquidity position has improved. Comparing this to the industry median current ratio, which remains relatively constant around 1.9399 in 2023, it is clear that WD-40's liquidity is significantly above average. With this positive trend, WD-40 garners 1 point in the Piotroski Analysis.

Number of shares not diluted?

The Change in Shares Outstanding criterion assesses whether a company is diluting shareholders' equity by issuing new shares or is boosting shareholder value by buying back shares.

Historical outstanding shares of WD-40 (WDFC)

WD-40 (WDFC) exhibited a decrease in Outstanding Shares from 2022 to 2023, with numbers dropping from 13,668,000 shares in 2022 to 13,578,000 shares in 2023. Therefore, the criterion is met, earning WDFC 1 point. This reduction in shares outstanding generally signals positive shareholder-focused actions like share buybacks, which can indicate management's confidence in the company's intrinsic value and long-term prospects. Over the last two decades, the number of shares has steadily decreased from 16,758,775 in 2003 to 13,578,000 in 2023, reflecting consistent buyback strategies.

Operating of WD-40 (WDFC)

Cross Margin is growing?

Gross margin measures the company's financial health by revealing the proportion of money left over from revenues after accounting for COGS.

Historical gross margin of WD-40 (WDFC)

The Gross Margin for WD-40 (WDFC) was 0.5104 in 2023 compared to 0.491 in 2022, indicating an increase. This improvement is beneficial and adds 1 point in the Piotroski Analysis. Historically, WDFC’s Gross Margin shows a cyclic pattern, peaking in 2017 at 0.5631, and remaining consistently above the industry median, which stood at 0.3018 in 2023. This trend reflects efficient cost management and competitive advantage in the market.

Asset Turnover Ratio is growing?

The asset turnover ratio measures how efficiently a company uses its assets to generate sales. This is crucial as it reflects overall operating efficiency.

Historical asset turnover ratio of WD-40 (WDFC)

WD-40 (WDFC) observed an increase in its asset turnover ratio from 1.2003 in 2022 to 1.2319 in 2023. This trend is recognized by a score of 1 under the Piotroski F-Score framework. It indicates a positive development in the company’s efficiency in using its assets to produce revenue. This follows a relatively consistent efficiency trend over the past 20 years, bar notable peaks like 2019's 1.3663 and troughs such as 2015's 1.0728. Overall, the stability with some upward adjustments suggests sound operational improvements.


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