Fastenal: A Great Hold but a Pricey Buy
Can the stock keep up that momentum? Let's see by the numbers.
Fastenal and its subsidiaries operate as a wholesaler and retailer of industrial and construction supplies in the United States and internationally. It offers threaded fasteners, such as bolts, nuts, screws, studs, and related washers that are used in manufactured products and building projects as well as in the maintenance and repair of machines and structures. It also offers miscellaneous supplies and hardware comprising various pins and machinery keys, concrete anchors, metal framing systems, wire ropes, strut products, rivets and related accessories.
The company serves the construction market, which consists of general, electrical, plumbing, sheet metal, and road contractors; and manufacturing market, including original equipment manufacturers, and maintenance and repair operations, as well as other users, such as farmers, truckers, railroads, mining companies, federal, state and local governmental entities, schools, and retail trades. As of December 31, 2011, it operated 2,585 stores. The company was founded in 1967 and is headquartered in Winona, Minnesota.(Yahoo Finance Profile)
Factors to consider (Technical indicators provided by Barchart): Barchart gives the stock a 100% technical buy signal as well as a Trend Spotter buy signal. The stock is trading above its 20-, 50- and 100-day moving averages, was up eight days and gained 7.10% in the last month. With a 61.84% Relative Strength Index and a 42.52 technical support level, the stock recently traded at $45.72, which is above its 50-day moving average of $43.43.
Fundamental factors: Wall Street is interested in this stock and six brokerage firms have assigned 12 analysts to make projections and recommendations. Revenue is expected to be up 14.2% this year and another 12.4% next year. Earnings are estimated to increase by 19% this year, an additional 16% next year and continue to increase at an annual rate of 17.9% for the next five years.
The P/E ratio is a little high at 31.35 compared to the 15.30 P/E of the market. The 1.8% dividend rate is about 50% of projected earnings and is slightly lower than the 2.3% dividend rate of the market. The company has an A+ financial strength rating being flush with cash to fund expansion and has no long term debt. Since the company has revenue from Canada, Europe and Asia it is subject to currency translations.
Investor interest: The professional analysts have released one buy, nine hold and two underperform recommendations but the consensus is that investors should see a total annual return in the 8%-10% range over the next five years.