Press Release: Fastenal And National Ffa Organization Launch Corporate Partnership

Fastenal has been treading water for the past six months, recording a small loss of 3.5% while holding steady at $40.19. The stock also fell short of the S&P 500’s 13.1% gain during that period.

Is there a buying opportunity in Fastenal, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free for active Edge members.

Why Is Fastenal Not Exciting?

We're swiping left on Fastenal for now. Here are three reasons there are better opportunities than FAST and a stock we'd rather own.

1. Lackluster Revenue Growth

We at StockStory place the most emphasis on long-term growth, but within industrials, a stretched historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Fastenal’s recent performance shows its demand has slowed as its annualized revenue growth of 4.8% over the last two years was below its five-year trend.

2. EPS Barely Growing

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

Fastenal’s unimpressive 7.9% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

3. Free Cash Flow Margin Dropping

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

As you can see below, Fastenal’s margin dropped by 1.2 percentage points over the last five years. If its declines continue, it could signal increasing investment needs and capital intensity. Fastenal’s free cash flow margin for the trailing 12 months was 12.1%.

Final Judgment

Fastenal isn’t a terrible business, but it doesn’t pass our bar. With its shares lagging the market recently, the stock trades at 33.7× forward P/E (or $40.19 per share). At this valuation, there’s a lot of good news priced in - we think other companies feature superior fundamentals at the moment. We’d recommend looking at one of our all-time favorite software stocks.

The end of the earnings season is always a good time to take a step back and see who shined (and who not so much). Let’s take a look at how maintenance and repair distributors stocks fared in Q3, starting with WESCO .

Supply chain and inventory management are themes that grew in focus after COVID wreaked havoc on the global movement of raw materials and components. Maintenance and repair distributors that boast reliable selection and quickly deliver products to customers can benefit from this theme. While e-commerce hasn’t disrupted industrial distribution as much as consumer retail, it is still a real threat, forcing investment in omnichannel capabilities to serve customers everywhere. Additionally, maintenance and repair distributors are at the whim of economic cycles that impact the capital spending and construction projects that can juice demand.

The 9 maintenance and repair distributors stocks we track reported a satisfactory Q3. As a group, revenues beat analysts’ consensus estimates by 2%.

Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 10% since the latest earnings results.

WESCO

Based in Pittsburgh, WESCO provides electrical, industrial, and communications products and augments them with services such as supply chain management.

WESCO reported revenues of $6.20 billion, up 12.9% year on year. This print exceeded analysts’ expectations by 4.9%. Overall, it was a very strong quarter for the company with a solid beat of analysts’ organic revenue estimates and an impressive beat of analysts’ revenue estimates.

"We delivered very strong results in the third quarter and again outperformed the market with our leading portfolio of products, services, and solutions. Sales growth accelerated this year, with organic sales up 6% in the first quarter, 7% in the second quarter, and 12% in the third quarter." said John Engel, Chairman, President, and CEO.

WESCO pulled off the biggest analyst estimates beat of the whole group. Unsurprisingly, the stock is up 12.4% since reporting and currently trades at $256.69.

Is now the time to buy WESCO? Access our full analysis of the earnings results here, it’s free for active Edge members.

Best Q3: VSE Corporation

With roots dating back to 1959 and a strategic focus on extending the life of transportation assets, VSE Corporation provides aftermarket parts distribution and maintenance, repair, and overhaul services for aircraft and vehicle fleets in commercial and government markets.

VSE Corporation reported revenues of $282.9 million, up 3.4% year on year, outperforming analysts’ expectations by 2.3%. The business had a stunning quarter with an impressive beat of analysts’ EBITDA estimates.

Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 4.6% since reporting. It currently trades at $171.31.

Is now the time to buy VSE Corporation? Access our full analysis of the earnings results here, it’s free for active Edge members.

Weakest Q3: Global Industrial

Formerly known as Systemax, Global Industrial distributes industrial and commercial products to businesses and institutions.

Global Industrial reported revenues of $353.6 million, up 3.3% year on year, falling short of analysts’ expectations by 1%. It was a disappointing quarter as it posted a significant miss of analysts’ EBITDA and EPS estimates.

Global Industrial delivered the weakest performance against analyst estimates in the group. As expected, the stock is down 22.8% since the results and currently trades at $27.11.

Read our full analysis of Global Industrial’s results here.

Fastenal

Founded in 1967, Fastenal provides industrial and construction supplies, including fasteners, tools, safety products, and many other product categories to businesses globally.

Fastenal reported revenues of $2.13 billion, up 11.7% year on year. This print was in line with analysts’ expectations. However, it was a slower quarter as it produced EPS in line with analysts’ estimates and a miss of analysts’ EBITDA estimates.

The stock is down 11% since reporting and currently trades at $40.75.

Read our full, actionable report on Fastenal here, it’s free for active Edge members.

Transcat

Serving the pharmaceutical, industrial manufacturing, energy, and chemical process industries, Transcat provides measurement instruments and supplies.

Transcat reported revenues of $82.27 million, up 21.3% year on year. This number surpassed analysts’ expectations by 3.5%. More broadly, it was a satisfactory quarter as it also produced an impressive beat of analysts’ revenue estimates but a significant miss of analysts’ EPS estimates.

Transcat delivered the fastest revenue growth among its peers. The stock is down 23.1% since reporting and currently trades at $54.32.

Read our full, actionable report on Transcat here, it’s free for active Edge members.