Why WD-40 Shares Jumped and Then Fell Back

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of WD-40 (NASDAQ: WDFC  ) jumped as much as 12% this morning on a strong earnings report but were trading flat by the end of the session.

So what: The cleaning and maintenance-product maker said sales increased 7% to $93.1 million, while earnings per share went from $0.57 a year ago to $0.66, well ahead of estimates at just $0.56. The improvements were led by the multi-purpose maintenance segment, which grew 12%, encompasses the vast majority of sales, and includes the namesake WD-40 degreaser. The company also raised its full-year guidance, saying it now expects EPS of $2.40 to $2.48, up from a previous range $2.32 to $2.40. Analyst are predicting $2.39.  

Now what: Given the strong results, the afternoon slide is a little surprising. By valuation standards, however, shares were already highly priced before the jump, with a forward P/E of 22, and the company is growing slowly, so further appreciation seems hard to justify. WD-40 is a strong brand, and a report like today's deserves an increase in share price, but not the 12% jump we saw earlier, considering its relatively limited opportunities.

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