Fastenal Co Valuation – November 2015 Update $FAST

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – November 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Fastenal Co (FAST) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Fastenal Company sells industrial and construction supplies to end-users (business-to-business), and also has some walk-in retail business. The Company’s product offerings include fasteners and other industrial and construction supplies, many of which are sold under the Fastenal product name. The Company’s product line, which it refers to as the fastener product line, consists of two categories: threaded fasteners, such as bolts, nuts, screws, studs and related washers, and miscellaneous supplies and hardware, such as various pins and machinery keys, concrete anchors, metal framing systems, wire rope, strut, rivets and related accessories. The Company’s product line includes fasteners, cutting tools, tools, hydraulics and pneumatics, material handling, janitorial supplies, electrical supplies, welding supplies, safety supplies, metals, direct ship and office supplies. It operates approximately 14 distribution centers in North America.


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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.


Downloadable PDF version of this valuation:

ModernGraham Valuation of FAST

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,596,511,711 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.54 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 107.16% Pass
6. Moderate PEmg Ratio PEmg < 20 25.07 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.52 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 4.54 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

FAST value chart November 2015

EPSmg $1.60
MG Growth Estimate 10.38%
MG Value $46.77
Opinion Fairly Valued
MG Value based on 3% Growth $23.17
MG Value based on 0% Growth $13.58
Market Implied Growth Rate 8.28%
Current Price $40.06
% of Intrinsic Value 85.66%

Fastenal Co qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the high PEmg and PB ratios.  The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $0.94 in 2011 to an estimated $1.60 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 8.28% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Fastenal Co (FAST)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

FAST charts November 2015

Net Current Asset Value (NCAV) $3.31
Graham Number $15.57
PEmg 25.07
Current Ratio 4.54
PB Ratio 6.52
Dividend Yield 2.72%
Number of Consecutive Years of Dividend Growth 18



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Most Recent Balance Sheet Figures

Balance Sheet Information Sep15
Total Current Assets $1,672,990,000
Total Current Liabilities $368,280,000
Long-Term Debt $0
Total Assets $2,495,277,000
Intangible Assets $0
Total Liabilities $711,786,000
Shares Outstanding (Diluted Average) 290,475,000

Earnings Per Share History

Next Fiscal Year Estimate $1.75
Dec14 $1.66
Dec13 $1.51
Dec12 $1.42
Dec11 $1.21
Dec10 $0.90
Dec09 $0.62
Dec08 $0.94
Dec07 $0.78
Dec06 $0.66
Dec05 $0.55
Dec04 $0.43
Dec03 $0.28
Dec02 $0.25
Dec01 $0.23
Dec00 $0.27
Dec99 $0.22
Dec98 $0.18
Dec97 $0.14
Dec96 $0.11
Dec95 $0.09

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.60
Dec14 $1.46
Dec13 $1.29
Dec12 $1.12
Dec11 $0.94
Dec10 $0.80
Dec09 $0.74
Dec08 $0.75
Dec07 $0.62
Dec06 $0.51
Dec05 $0.40
Dec04 $0.32
Dec03 $0.26
Dec02 $0.24
Dec01 $0.22
Dec00 $0.21
Dec99 $0.17

Recommended Reading:

Other ModernGraham posts about the company

19 Best Stocks For Value Investors This Week – 8/29/15
Fastenal Company Analysis – August 2015 Update $FAST
The Best Companies of the Machinery Industry – August 2015
30 Companies in the Spotlight This Week – 5/23/15
Fastenal Company Quarterly Valuation – May 2015 $FAST

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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.


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