WD-40 Company Pre-earnings Analysis
Chart done on daily timeframe. WD-40 is set to report earnings this week and expectations are about the same as the same quarter last year. Analysts expect the company to report a 1.15 EPS, which is lower than what the company has reported the last four quarters so we expect it to meet expectations. WDFC has shown consistent revenue growth over the last seven years (with the exception of 2020), proving that it has skin in the game in the very competitive chemicals industry. The company’s balance sheet is also healthy with a 2:1 assets to liabilities ratio, and its free cash flow is at a positive 108M TTM.
Although all signs are positive for the company, its price to earnings ratio is a bit expensive. WDFC is trading at a P/E of 49x, higher than the industry average of 30x. The only two ways to bring their P/E to a more reasonable number is by increasing their earnings per share (net profit), or by a decline in their stock price. So these earnings, it’s not only important for WDFC to beat its profit expectations, they need to surpass them by 30-50% in order to really gain the attention of buyers.
Option chain analysis:
WDFC’s options that expire on April 19th, 2024 are currently reflecting an implied volatility reading of 75%, which translates to about a $27 move in the underlying stock. If the company can surpass earnings expectations and provide strong guidance then it has a chance of making that move to the upside. Keep in mind that this is a low volume stock so its options don’t have much liquidity.