Fastenal surges close to 52-week high
By Jeffrey Germanotta -- Industrial Distribution, 6/1/1999
Fastenal has posted the strongest price appreciation over the last month, rising 30 percent. We believe this gain is largely the result of three factors. First, investor confidence in cyclical stocks has increased as several economic indicators have become more positive. Second, Fastenal's first quarter earnings exceeded Wall Street expectations by one cent per share. Third, Fastenal is a high performer, having produced an unequalled track record, with a 27.4 percent return on equity and 10-year CAGR in earnings per share of 33.1 percent.More impressive is the fact that all growth is organic and funded with internally generated cash flow. We believe Fastenal to be the largest fastener distributor and one of North America's larger industrial products distributors, with over 760 stores in 48 states, Canada, and Puerto Rico. Its original fastener product line (70 percent of sales) has expanded to include tools, safety supplies, metal cutting tools, fluid power components, material-handling equipment, storage products, janitorial supplies, and paper products. Additionally, Fastenal derives four to five percent of revenues from products custom-manufactured or modified by the company.
Fastenal's growth strategies include an average of 10 percent new store openings per year, increasing sales of existing stores via expansion of the sales force and product offering, and expansion into new channels such as electronic commerce. Its goals include growing earnings per share an average of 30 percent annually through a business cycle.
Jeffrey Germanotta is senior vice president of equity research at R.W. Baird & Co. Each month, he provides analysis of the distribution sector. He can be reached at 414-765-3572, or emailed at jgermanotta@rwbaird.com
EDITOR'S NOTE: Robert W. Baird & Co., Inc. maintains a trading market in the securities of this company.
FINANCIAL SUMMARY
Fastenal, Inc.
Description: Industrial Distribution
Corporate Headquarters: Winona, Minnesota
Projected 3-Year EPS Growth Rate: 30%
Book Value (3/31/99): $6.11
Market Capitalization (mil): 1,938
Return on Equity (3/31/99): 27.4%
Institutional Ownership: 48%
Insider Ownership: 26%
Shares Outstanding (mil): 38.0
Average Daily Trading Volume: 343,305
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