Fastenal Company (FAST)

Conclusion

Fastenal distributes fasteners and industrial and construction supplies across the United States, Canada, Mexico and internationally, serving manufacturers, maintenance customers and construction firms. At a price of 54.57 USD on 2026-11-09, the market capitalisation is 62.6 billion USD.

The verdict is overvalued. Today's multiples sit well above their own ten-year medians: the P/E is 44.1 against a median of 30.5, and the price-to-free-cash-flow ratio is 59.4 against 38.3. The DCF gives 19.74 USD per share, and the fair value band runs from 22.26 to 33.39 USD with a midpoint of 27.83 USD, a margin of safety of -49.0% at the current price. The fair value from historical multiples is 35.92 USD. The reverse DCF implies growth of 19.9% a year, against revenue growth of 7.8% over five years and free cash flow per share growth of 2.4% over the same period.

What holds the case up is the return on capital: ROIC of 32.4% against a WACC of 8.8%, and an Altman Z-score of 32.38 in the safe zone. Free cash flow conversion of 74.3% over the last twelve months also supports the earnings. What would break it is the price itself: the price-to-free-cash-flow ratio of 59.4 and a free cash flow yield of 1.7%. Growth is the other weak point, with revenue compounding at 5.5% over three years and EPS at 5.0%.

Financial health

Financial strength is green, held up by all four of its measures: the current ratio of 3.93, net debt to EBITDA of 0.12x, interest coverage of 504.9x and the Altman Z-score. Debt is light, with a debt-to-equity ratio of 0.11 and a quick ratio of 1.88. The Altman Z-score of 32.38 falls in the safe zone, but the model was designed for manufacturers, and Fastenal is a distributor, so the score is a rough guide. Insolvency risk is low, about 0.01% by the estimate of the Ohlson model over one to two years. The company's balance sheet poses no visible solvency concern.

Earnings quality

Earnings quality is green, supported by the Piotroski score of 7 out of 9 and by a share count that has shrunk slightly over five years, at a compound rate of -0.02%. Free cash flow conversion is 74.3% over the last twelve months and 83.2% over five years. The accrual ratio of -0.77% is negative, meaning cash earnings exceed reported earnings. Stock-based compensation is only 0.11% of revenue, and free cash flow after it is 1.04 billion USD. The Beneish M-score is not available. Over the last eight quarters the company beat estimates twice and missed twice, with an average surprise of 0.36%. Analysts raised the current-year estimates over the past 90 days by 1.2%, with three upward and one downward revision in the last 30 days.

Profitability

Profitability is green, with four measures assessed as good. ROIC of 32.4% sits well above the WACC of 8.8%, a gap the data records as creating value, and the five-year median ROIC is 30.0%. Margins are close to their ten-year medians: the gross margin is 44.6% against 46.1%, the operating margin is 20.5% against 20.2%, and the net margin is 15.6% against 15.2%. The operating margin has been stable, with a variation of 1.5%. Return on equity of 34.2% is not inflated by leverage: the DuPont split shows a net margin of 15.4%, an asset turnover of 1.62x and an equity multiplier of only 1.28x. The returns come from operations, not from borrowing.

Growth

Growth is green, though its component measures are mostly neutral. Revenue compounded at 5.5% over three years, 7.8% over five years and 7.8% over ten years. EPS grew at 5.0%, 8.0% and 9.5% over the same periods. Free cash flow per share grew at 11.1% over three years but only 2.4% over five years. Revenue has grown in all ten of the last ten years, which is a consistent record. Analysts expect EPS to grow 10.7% next year, which is above the recent three-year pace and rests on estimates that have been revised only slightly.

Valuation

Valuation is red, as the verdict is overvalued and the margin of safety of -49.0% is the only assessed measure. Every multiple is above its ten-year median: the P/E is 44.1 against 30.5, a premium of 44.8%; EV/EBITDA is 30.7 against 20.2, a premium of 51.6%; price-to-free-cash-flow is 59.4 against 38.3, a premium of 55.1%; price-to-sales is 6.9 against 4.6, a premium of 49.1%; and price-to-book is 15.1 against 9.9, a premium of 53.0%. The DCF gives 19.74 USD per share, using a discount rate of 8.9%, 7.8% growth over the forecast and 2.5% terminal growth. The fair value band runs from 22.26 to 33.39 USD. The reverse DCF implies 19.9% growth, a gap of 12.2% over the five-year revenue CAGR. The dividend yield is 1.8%, with a forward yield of 2.0%, and the payout is 104.6% of free cash flow, so the dividend is not covered by free cash flow.

Risks

The weakest numbers would damage the case in specific ways. A free cash flow yield of 1.7% leaves little room if growth slows, and the dividend payout of 104.6% of free cash flow would be hard to sustain if cash flow falls. Three-year revenue growth of 5.5% and EPS growth of 5.0% give little cushion against a multiple that is 44.8% above its median. Declining ROIC, currently 32.4%, would narrow the gap over the 8.8% WACC. The Beneish M-score is not available, so manipulation risk cannot be tested. This analysis has no debt maturity schedule and no revenue by segment, so the timing of any refinancing and the mix of growth cannot be assessed.