Numbers

Claude View

The Numbers

Oil-Dri is having its best fundamental run in 20+ years: FY2025 revenue of $486M (+11%), operating margin 14.0% (vs. a 20-year average near 5%), net margin 11.1%, ROE 21%, and FCF of $48M — all record or near-record figures built on bleaching clays for renewable diesel plus the May-2024 Ultra Pet (silica cat litter) acquisition. The stock has tripled from its FY2022 trough and now trades at roughly 2.0x GuruFocus fair value ($73 vs. GF Value $37), 20x TTM EPS and 11x EV/EBITDA — well above its own long-term averages. The single metric most likely to rerate the stock is operating margin: the market is paying for about 14% margins to persist; any mean-reversion toward the 20-year norm would compress the valuation quickly.

Snapshot

GF Score of 70 is solidly mid-pack for the US chemicals universe; the headline issue is the "GF Value" fair-value gap, which is large because GuruFocus anchors fair value on a 20-year earnings history that is mostly well below today's profitability.

Quality Scorecard — is this durable?

Solid financial-health picture: Altman Z of 6.9 and an F-Score of 7 say this is a conservatively run balance sheet with improving operating momentum. The one soft spot is Predictability (2.5/5) — ODC's earnings have been lumpy for decades, which is the main reason the market is reluctant to underwrite today's margins as a new normal.

Revenue & Earnings Power — 20-year view

The 2013-2022 stretch sat at 4-6% operating margin with FY2022 nearly breaking even. Then three consecutive years of margin expansion to 14% — the largest sustained step-change in the modern history of the company. Two tailwinds drove it: bleaching clay demand from the renewable-diesel build-out (B2B segment up 28% in FY25) and pricing that finally caught up to 2021-22 raw material cost inflation.

Recent Direction — 16 quarters

YoY growth has collapsed from roughly +10% through most of FY25 to -5.8% in 1Q26 and +0.7% in 2Q26 — the lap of the Ultra Pet acquisition plus tougher renewable-diesel comps. This is the single most important near-term data point: margins held (2Q26 operating margin near 13.3%) but the top line no longer grows.

Cash Generation — are the earnings real?

Trailing 3-year FCF / Net income ≈ 0.84x (FY23-25 FCF $101M / NI $123M). Earnings quality was hurt by the 2021-22 working-capital build but the conversion picture has cleaned up entirely. Capex has roughly doubled vs. FY2016-19 as ODC expanded bleaching-clay capacity in Mississippi — that reinvestment is the source of the current earnings step-change, not financial engineering.

Capital Allocation — 10-year flow

Dividend has been the priority — raised every year for 22 consecutive years (yield near 1.1% today). Buybacks are small and opportunistic. The single outsized move in the last decade was the $44M Ultra Pet acquisition in May-2024, funded with a $35M draw on the credit facility — now partly repaid with FY25 cash. Capital discipline has been consistent with a family-controlled company: conservative, slow, dividend-heavy.

Balance Sheet Health

Net cash of roughly +$10M at FY25 close (vs. net debt of $27M post-Ultra Pet in FY24). Current ratio 2.6x, interest coverage 28x, Altman Z 6.9 — the balance sheet is the strongest it's been in a decade. Not a credit story.

Valuation — now vs. its own 20-year history (the critical chart)

P/E is roughly in line with its own 20-year average — the stock is not priced for multiple expansion. The tell is EV/EBITDA at 11.2x vs. a 20-year mean of 7.8x (approximately +1.5 SD). That premium is the market saying: "we believe the new EBITDA run-rate ($91M FY25) is real and not a cycle peak." Any mean-reversion of EBITDA toward the 2013-22 average near $25M would drive EV/EBITDA off the chart — which is why the GF Value (anchored on long-run earnings) screens 49% below today's price.

Peer Comparison — specialty/consumer chemicals

ODC's gross margin (29%) still trails CHD/CLX (45%) — it is a clay miner, not a branded-products house — but net margin (11%) and ROE (21%) are at or above both, and it trades at a cheaper P/E than CHD with higher ROE. Versus direct chemical peers MTX and AVD, the gap is even wider: both are loss-making, ODC earned $54M. The peer gap that matters: ODC is suddenly outperforming companies 5-20x its size on profitability.

Fair Value & Scenario

The spread is deliberately wide: $38 bear / $68-73 base / $82 bull. The bear case is not a crash scenario — it is simply "margins revert to what they were for 20 years." The bull case requires the renewable-diesel and pricing tailwinds to extend another 2-3 years. Today's price sits between base and bull, which is consistent with a market that is giving the company the benefit of the doubt but not pricing in continued expansion.

What the numbers say in one paragraph

The numbers confirm a genuine structural improvement in Oil-Dri's economics — FY25 operating margin, ROE, FCF and net cash are all the best in 20+ years, and the Altman Z / F-Score / Beneish combination rules out earnings manipulation. They contradict the popular "small-cap value compounder" framing: ODC is no longer cheap on multiples (EV/EBITDA roughly +1.5 SD above its 20-year average), and the outperformance is concentrated in the renewable-diesel-driven B2B segment plus the Ultra Pet acquisition — not broad-based organic strength. Watch next: FY26 operating margin and B2B segment growth. If operating margin stays above 12% through two more quarters while revenue re-accelerates off the 1Q26 dip, the thesis holds; if margin slips toward 10% on softer renewable-diesel demand, the GF Value gap becomes very relevant very quickly.