In This Article:
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like WD-40 (NASDAQ:WDFC). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
How Quickly Is WD-40 Increasing Earnings Per Share?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. WD-40 managed to grow EPS by 8.7% per year, over three years. That's a good rate of growth, if it can be sustained.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. WD-40 maintained stable EBIT margins over the last year, all while growing revenue 8.7% to US$611m. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
View our latest analysis for WD-40
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of WD-40's forecast profits?
Are WD-40 Insiders Aligned With All Shareholders?
Prior to investment, it's always a good idea to check that the management team is paid reasonably. Pay levels around or below the median, can be a sign that shareholder interests are well considered. For companies with market capitalisations between US$2.0b and US$6.4b, like WD-40, the median CEO pay is around US$7.6m.
WD-40's CEO took home a total compensation package of US$3.7m in the year prior to August 2024. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.