Fastenal Co ([NASDAQ:FAST](https://www.chartmill.com/stock/quote/FAST/profile)) – A Quality Stock with Strong Fundamentals

Fastenal Co (NASDAQ:FAST) stands out as a potential candidate for quality investors, meeting key criteria in profitability, financial health, and operational efficiency. The company, a distributor of industrial and construction supplies, has demonstrated consistent performance and solid fundamentals.

Why Fastenal Fits the Quality Investing Profile

• Strong Return on Invested Capital (ROIC) – Fastenal’s ROIC of 29.89% (excluding cash and goodwill) is well above the 15% threshold for quality stocks, indicating efficient use of capital.
• Low Debt Burden – The company’s debt-to-free cash flow ratio of 0.23 suggests it could pay off all debt in less than a year, reflecting strong financial health.
• Revenue and Profit Growth – Over the past five years, Fastenal has delivered 8.33% annual revenue growth and 7.41% EBIT growth, showing steady expansion.
• High Profit Quality – With a five-year average profit quality of 87.39%, the company effectively converts net income into free cash flow.
• Profitability Metrics – Fastenal’s operating margin (19.89%) and profit margin (15.13%) rank among the best in its industry.

Valuation Considerations

While Fastenal scores well on quality metrics, its valuation appears elevated with a P/E ratio of 40.94, above both industry and S&P 500 averages. Quality investors often accept higher valuations for companies with durable competitive advantages, but further analysis is warranted.

Fundamental Analysis Summary

Fastenal’s fundamental rating of 6/10 reflects strong profitability and financial health, offset by a high valuation. Key strengths include:

• Top-tier ROIC and margins
• Minimal debt and strong liquidity
• Reliable dividend history (though payout ratio is high at 79.61%)
• Expected future revenue growth of 8.33%

For investors seeking stable, well-managed businesses, Fastenal presents a compelling case.

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Disclaimer

This is not investing advice. The article highlights observations at the time of writing, but investors should conduct their own analysis before making decisions.