Fastenal Co (FAST, Financial) recently reported a daily loss of 1.38%, contributing to a three-month decline of 3.07%. Despite these fluctuations, the company maintains an Earnings Per Share (EPS) of 2.02. This analysis seeks to determine whether Fastenal Co is fairly valued in the market, guiding potential investors through a detailed valuation analysis.
Company Overview
Founded in 1967 in Winona, Minnesota, Fastenal Co has grown from a small fastener store to a major entity in the industrial supplies sector. It now operates through roughly 1,600 branches, more than 1,800 on-site locations, and 15 distribution centers. Fasteners constitute about 30%-35% of its sales, with the company also offering comprehensive supply-chain solutions like vending and vendor-managed inventory. This blend of historical context and current operations sets the stage for a deeper valuation analysis.
Understanding GF Value
The GF Value is a unique measure that estimates the intrinsic value of a stock based on historical trading multiples, a GuruFocus adjustment factor, and future business performance projections. For Fastenal Co, the GF Value is set at $63.16, suggesting that at its current price of $67.49, the stock is fairly valued. This valuation implies that the stock price is expected to perform in line with the company's business growth over the long term.
Financial Strength and Stability
Investing in a company with solid financial health is crucial. Fastenal Co's financial strength is robust, with a score of 9 out of 10. The company's cash-to-debt ratio stands at 0.49, which, although lower than some peers, still supports a stable financial outlook.
Profitability and Growth Prospects
Fastenal Co has demonstrated strong profitability, with a remarkable operating margin of 20.67%, ranking better than 96.55% of its industry peers. However, its growth metrics present a mixed picture. The company's 3-year average revenue growth rate is below the median for the industry, which could signal challenges ahead. Despite this, Fastenal's ability to maintain high profitability levels suggests effective management and operational efficiency.
Comparing the Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) further underscores its financial acumen, with the ROIC significantly surpassing the WACC, indicating value creation.
Conclusion
Fastenal Co (FAST, Financial) appears to be fairly valued at its current price, reflecting its solid financial strength and profitability. While growth remains an area for improvement, the company's efficient capital allocation and market position bode well for future stability. For more detailed financial data, visit Fastenal Co's 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
