FASTENAL CO (NASDAQ:FAST) – A Quality Stock Worth Considering

FASTENAL CO (NASDAQ:FAST) stands out as a potential candidate for quality investors, meeting key criteria from our Caviar Cruise screen. The company demonstrates strong fundamentals, including solid profitability, efficient capital allocation, and healthy cash flow generation. Below, we examine why FAST aligns with quality investing principles.

Key Strengths of FASTENAL CO

• High Return on Invested Capital (ROIC): FAST’s ROIC (excluding cash and goodwill) stands at 29.89%, well above the 15% threshold for quality stocks. This indicates efficient use of capital to generate profits.
• Low Debt Relative to Cash Flow: The company’s Debt-to-Free Cash Flow ratio is 0.23, meaning it could repay all debt in less than a year using current cash flow. This reflects financial strength and flexibility.
• Consistent Revenue Growth: FAST has delivered 8.48% annual revenue growth over the past five years, showing steady business expansion.
• Strong Profit Quality: With a five-year average Profit Quality (FCF/Net Income) of 87.39%, FAST converts most of its earnings into cash, a sign of reliable financial performance.
• EBIT Growth Outpacing Revenue: FAST’s EBIT growth (7.41%) has been slightly below revenue growth, but the company maintains strong operating efficiency.

Fundamental Analysis Summary

FASTENAL CO earns a fundamental rating of 7/10, with standout scores in profitability (8/10) and financial health (9/10). The company excels in key metrics like Return on Equity (31.21%) and Operating Margin (19.89%), placing it among the top performers in its industry. While its valuation appears slightly expensive with a P/E of 27.11, this may be justified by its strong earnings growth outlook (13.45% annual EPS growth expected).

For investors seeking quality stocks with a track record of stability and efficient capital deployment, FAST presents a compelling case.

Our Caviar Cruise screener lists more quality stocks and is updated regularly.

Disclaimer

This is not investing advice! The article highlights observations at the time of writing, but you should conduct your own research before making investment decisions.