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WD-40’s Valuation Defies Logic | The Motley Fool

Some stocks seem to have a set of valuation characteristics of their very own, and WD-40 (NASDAQ:WDFC) is definitely one of them.

Like other companies with exposure to the home improvement sector, WD-40 had a very strong August-ended quarter. In nutshell, global stay-at-home measures have encouraged a shift in spending toward DIY and spending on the home. However, WD-40’s valuation looks more up than events would justify and investors need to carefully consider buying into the stock at this level.

A spray can held by a glove-clad hand

Image source: Getty Images.

Before getting into the details of the company’s operations, let’s pause for a moment and consider the hefty valuations that WD-40 now trades at. Whether it’s enterprise value (market cap plus net debt) to earnings before interest, taxation, depreciation, and amortization (EBITDA); price to free cash flow, or price to earnings, WD-40’s valuation is expensive.

WDFC EV to EBITDA Chart

Data by YCharts

Three reasons to be cautious on WD-40

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