Fastenal was founded in 1967 to make and sell fasteners (hence the name). It's a fastener company at heart, but it does so much more. It sells all kinds of different industrial and construction supplies in the following product categories:
Fastenal is a worldwide company operating approximately 2,700 stores in North America, Asia, Europe, Central and South America, and Africa. The Company also operates eleven distribution centers in the United States (Minnesota, Indiana, Ohio, Pennsylvania, Texas, Georgia, Washington, California, Utah, North Carolina, Kansas), two distribution centers in Canada (Ontario, Alberta), and one in Mexico (Nuevo Leon).
- threaded fasteners and miscellaneous supplies
- metal cutting tool blades and abrasives
- fluid transfer components and accessories for hydraulic and pneumatic power
- material handling products
- storage and packaging products
- janitorial, chemical and paint products
- electrical, welding and safety supplies
- metals, alloys, and materiels
- office supplies
Fastenal is a worldwide company operating approximately 2,700 stores in North America, Asia, Europe, Central and South America, and Africa. The Company also operates eleven distribution centers in the United States (Minnesota, Indiana, Ohio, Pennsylvania, Texas, Georgia, Washington, California, Utah, North Carolina, Kansas), two distribution centers in Canada (Ontario, Alberta), and one in Mexico (Nuevo Leon).
- Value investors generally won't look at a stock with a P/E ratio of 30 or more, but this company is a growth company and historically its P/E ratio has rarely been below 30.
- Regardless of the fact that this company has been around since 1967, it is still growing and expanding.
- Fastenal's business is intimately linked to the industrial and construction industries which are linked to the overall world economy.
- Fastenal has a current yield above 2% and it's growing at a rate of over 20% per year.
- Fastenal has a juicy one year estimated total return of over 18%.
The Company
| Fastenal Company (FAST), together with its subsidiaries, operates as a wholesaler and retailer of industrial and construction supplies in the United States, Canada, and internationally. The company offers fasteners and other industrial and construction supplies under the Fastenal name. Its fastener products include threaded fasteners, such as bolts, nuts, screws, studs, and related washers, which are used in manufactured products and building projects, as well as in the maintenance and repair of machines and structures; and miscellaneous supplies and hardware consisting of various pins and machinery keys, concrete anchors, metal framing systems, wire ropes, strut products, rivets, and related accessories. The company serves the manufacturing market that comprise original equipment manufacturers, and maintenance and repair operations, as well as other users, such as farmers, truckers, railroads, mining companies, federal, state and local governmental entities, schools, and retail trades; and construction market, which include general, electrical, plumbing, sheet metal, and road contractors. As of December 31, 2012, it operated 2,700 company-owned or leased stores. Fastenal Company was founded in 1967 and is headquartered in Winona, Minnesota. (Daily Chart) (Weekly Chart) | 13 July 2014 Price $46.15 1yr Target $53.50 Analysts 8 1yr Cap Gain 15.93% Dividend $1.00 Yield 2.17% 1yr Tot Return 18.10% Market Cap $13.69 Bil 3yr EarnGR 18.62% 5yr EarnGR 9.94% 3yr DivGR 24.68% 5yr DivGR 25.20% Payout Ratio 65.78% Beta 1.03 EPS (ttm) $1.52 EPS next yr $1.97 P/E 30.36 PEG 1.87 Debt/Equity 0.00 ROA 21.80% ROE 25.70% |
The Fundamentals
By sorting through the fundamentals (listed below), several things quickly become apparent. Revenues have been on a steady increase except for the years 2009-2010. This is an excellent record for an industrial equipment company and the down years can be easily explained once you remember that this country went through a mild recession in 2009-2010 and then understand the connection between Fastenal and the industrial and construction industry. This also reduced the 5 year revenue growth rate that would otherwise be in the low to mid teens. Earnings experienced a similar series of events and the explanation is the same as for revenues. It also reduced the 5 year earnings growth rate that would otherwise be in the upper teens.
Dividends, on the other hand, continually increased during this entire ten year period, based upon the regularly scheduled dividends minus the supplemental dividends. Adding in those supplemental dividends causes a distortion in the calculated dividend growth rates, so I simply excluded them from my calculations. I looked at them as a bonus and I reserved my judgement on the fundamentals to just the regularly scheduled dividends. The result is that this company has an excellent dividend growth rate. But they've done this by allowing the payout ratio to expand. That can't happen indefinitely. Dividend growth rates in the mid 20s will eventually expand the payout ratio to unsustainable levels and the dividend growth rate will have to fall into the mid to upper teens to align it with the earnings growth rate.
Dividends, on the other hand, continually increased during this entire ten year period, based upon the regularly scheduled dividends minus the supplemental dividends. Adding in those supplemental dividends causes a distortion in the calculated dividend growth rates, so I simply excluded them from my calculations. I looked at them as a bonus and I reserved my judgement on the fundamentals to just the regularly scheduled dividends. The result is that this company has an excellent dividend growth rate. But they've done this by allowing the payout ratio to expand. That can't happen indefinitely. Dividend growth rates in the mid 20s will eventually expand the payout ratio to unsustainable levels and the dividend growth rate will have to fall into the mid to upper teens to align it with the earnings growth rate.
| Years 2015 Est 2014 Est 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 | Revenues $4.19 Bil $3.72 Bil $3.32 Bil $3.13 Bil $2.76 Bil $2.26 Bil $1.93 Bil $2.34 Bil $2.06 Bil $1.80 Bil $1.52 Bil $1.23 Bil $0.99 Bil | Earning $1.97 $1.69 $1.51 $1.42 $1.21 $0.90 $0.62 $0.94 $0.77 $0.66 $0.55 $0.43 $0.27 | Dividends $1.16 $1.00 $0.80 $.74 ($1.24*) $0.65 $.41 ($.62*) $0.36 $.26 ($.39*) $0.22 $0.20 $0.15 $0.10 $0.05 | Payout Ratio 58.88% 59.17% 52.98% 52.11% 53.71% 45.55% 58.06% 27.65% 28.57% 30.30% 27.27% 23.25% 18.52% |
* Note: Fastenal began paying annual dividends in 1991, semi-annual dividends in 2003, and then expanded to quarterly dividends in 2011. In 2013, they paid quarterly dividends per share of $0.10 in March, $0.20 in May, $0.25 in August, and $0.25 in November. In 2014, they paid a quarterly dividend per share of $0.25 in February, $0.25 in May, and will pay our next dividend in August. There were supplemental dividends paid in December 2012, 2010, and 2008. In addition, Fastenal had a share buy back program in place totaling $8.847 Mil in 2014, $9.080 Mil in 2013, $41.104 Mil in 2009, $25.958 Mil in 2008, $87.312 Mil in 2007, $17,294 Mil in 2006, and $18.739 Mil in 2005.
| Revenues Growth Rates 3yr = 13.53% 5yr = 7.24% 10yr = 12.86% Earnings Growth Rates 3yr = 18.62% 5yr = 9.94% 10yr = 18.78% Dividend Growth Rates 3yr = 24.68% 5yr = 25.20% 10yr = 31.95% |  |
The Technicals
In the early 1990s you could buy stock in this company for less than a dollar per share. Fifteen years later the stock was selling for $20 per share. For the next four years it consolidated between $16 and $24 and a lot of money was made by swing traders simply trading in and out of the stock.
From 2009 to 2012 the stock moved up into the low $40s where it is today. From 2012 until today it has been consolidating between $40 and $50 per share. Once again a lot of money has been made by swing traders simply trading in and out of the stock. These kinds of patterns are common in technical analysis. Once these consolidation patterns exhaust themselves, the stock tends to continue along its previous trajectory. I expect Fastenal to once again pull out of this consolidation area and move higher.
From 2009 to 2012 the stock moved up into the low $40s where it is today. From 2012 until today it has been consolidating between $40 and $50 per share. Once again a lot of money has been made by swing traders simply trading in and out of the stock. These kinds of patterns are common in technical analysis. Once these consolidation patterns exhaust themselves, the stock tends to continue along its previous trajectory. I expect Fastenal to once again pull out of this consolidation area and move higher.
 Daily Chart |  Weekly Chart |
The Competition
Fastenal Company is part of the Industrial Equipment Wholesale Industry which is part of the Services Sector of the economy. Below are a few of the major corporations included in this industry. They are listed in the order of their market capitalization.
Conclusion
I've been in and out of this stock several times since the early 90s and fortunately I've made a nice profit each time. It's a great company with a great product and sometimes I wish I had simply bought the stock and continued to hold it. Going forward I believe buying and holding this stock is exactly what I intend to do.
I believe that almost every country that Fastenal serves will continue grow and expand but at different rates. Each country will need to expand its manufacturing, industrial and construction industries for reasons unique to that country and Fastenal will continue to expand to be there to assist. I also like how this company is conservatively managed with a tight control on its expenses and debt.
I expect this company's stock to find support in the $44-$45 area with secondary support near $40. Based on those support levels I intend to put in a buy at $45 and start a buying program to accumulate a significant position (for me!) in this company.
I believe that almost every country that Fastenal serves will continue grow and expand but at different rates. Each country will need to expand its manufacturing, industrial and construction industries for reasons unique to that country and Fastenal will continue to expand to be there to assist. I also like how this company is conservatively managed with a tight control on its expenses and debt.
I expect this company's stock to find support in the $44-$45 area with secondary support near $40. Based on those support levels I intend to put in a buy at $45 and start a buying program to accumulate a significant position (for me!) in this company.
The Interactive Live Chart
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