FASTENAL CO (FAST): what the price assumes

In the published model solve dated 2026-Q2, anchored at $49.79, FASTENAL CO (FAST) is priced for +28.8% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-26.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/FAST

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 9.1% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: high (limited comparison data)

Valuation X-Ray

Every valuation family lands below the price. The price therefore sits beyond what those standard frames encode.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that call it expensive: Asset, Earnings, Relative, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.2%); the inversion above states its own rate.

Per-Model Detail (n=17)

Economic-Unit Decomposition (Sum Of The Parts)

Only one reportable economic unit is present in the current topology source. Consolidated operating lenses remain available, but there is no multi-unit decomposition.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Bullet Takeaways

• The product that matters here is hardware bolted inside the customer's factory rather than the fastener that comes out of it: 25,892 weighted vending and bin units were signed during 2025, and the company reckons the market could eventually hold as many as 1.7 million such units.

• The largest risk is arithmetic rather than operational: today's quote embeds operating profit compounding around 28% a year, while the operating margin moved twenty basis points in 2025 and the sales line grows in the low teens.

• The line to watch is gross margin, which printed 45.0% of net sales for 2025 and 44.6% in the first quarter of 2026, with the company warning that costs rise "in subsequent quarters as our lower tariff inventory is depleted and replaced with inventory that is subject to new and expanded tariffs".

Bull Case

Run a screen across industrial distributors and Fastenal comes back looking like the rest of them: a catalogue, a warehouse network, 8.4 billion dollars of sales. The screen is describing the wrong business.

What actually sits between this company and its customer is a machine. The industrial vending units and bin-stock systems it installs live on the shop floor, and the annual report describes the technology behind them as built "to put physical product closer to the point of use in a customer location, increase the visibility of a customer's supply chain (to the customer as well as our personnel), and/or improve" the way the supply chain runs. Once a device is bolted down and connected, restocking stops being a purchasing decision and becomes a refill. The company signed 25,892 weighted units during 2025 and estimates the market could ultimately support as many as 1.7 million vending units, which means the installed base is nowhere near a ceiling.

The financial signature of that arrangement is a margin no ordinary distributor earns. Gross profit ran 45.0% of net sales in 2025 and operating income 20.2%. GWW, the largest name in this cohort at 18.38 billion dollars of revenue, converts 14.2% of sales into operating profit. MSM converts 8.5%. WCC, larger than Fastenal on the top line, converts 5.3%. Roughly forty percent more operating profit per sales dollar than the biggest peer, and better than double what the mid-sized ones manage, is not a procurement advantage. It is what happens when the supplier owns the shelf.

The revenue underneath is unusually committed for a distribution business. The filing describes a customer base "engaged in a wide range of activities, none of which individually constitute 10% of sales", spanning non-residential construction, resellers, transportation, warehousing and data centers, with roughly 71% to 76% of customers sitting in manufacturing end markets. Spread that wide, no single order book failing takes the company with it.

Growth has not stalled either, and the geography disclosure shows where it is coming from. Sales from United States selling locations reached 1,816.3 million dollars in the first quarter of 2026 against 1,629.4 million a year earlier, while Canada and Mexico moved to 306.3 million from 268.9 million. In that same quarter the company signed 6,950 weighted FASTBin and FASTVend devices, a pace slightly ahead of the 2025 run rate.

Two structural facts finish the case. The share count has drifted down about 0.1% a year since early 2022, so growth in the business is not being handed away through issuance. And operating profit covers the interest bill roughly 273 times over, which is another way of saying the capital structure has no opinion about any of this. Whatever the operating result turns out to be, holders keep it.

Bear Case

Industrial distribution is a cyclical business, and the margin that makes this one look like a compounder is currently being held up by expense discipline rather than by the product.

Follow where the operating result actually comes from. In 2025 gross profit came to 45.0% of net sales, slightly below the 45.1% of the year before, while SG&A fell to 24.8% from 25.1%. Operating income therefore rose, to 20.2% from 20.0%. The annual report states the mechanism plainly: volume growth was "sufficient to produce SG&A leverage that could offset mix-related gross margin contraction, resulting in operating margin expansion". That is a genuine achievement and it is also a requirement that renews every year. Expense leverage needs volume to keep climbing. Gross margin is the line that says what the product itself is worth, and it is moving the other way: 44.6% in the first quarter of 2026 against 45.1% a year earlier.

There is a named reason to expect more of that pressure rather than less. The quarterly filing warns that costs rise "in subsequent quarters as our lower tariff inventory is depleted and replaced with inventory that is subject to new and expanded tariffs", and the company separately notes direct exposure to commodity steel pricing through the fasteners and hardware it buys and sells. Neither is a demand problem. Both land on the same gross margin line that is already drifting.

Set that against what the quote requires. Today's level embeds operating profit compounding around 28% a year, which is not a pace this company has run. Against the peer group the multiple sits at the very top of the distribution and well beyond its upper quartile, and of comparable fast growers only about 26% sustained anything like that pace over a five-year stretch. Room for error is thin, because there is no cushion anywhere in the frames: the asset-value family lands roughly four times under the current level, the earnings-power family about three and a half times under, and the peer-multiple and forward-growth families roughly two times under.

The customer base is diversified but the exposure is not. Somewhere between 71% and 76% of customers sit in manufacturing end markets, which the filing lists as heavy machinery, fabricated products, process industries including oil and gas, petrochemical, mining, pulp and paper, and transportation components. That is the part of the economy that stops ordering first when order books thin. Around 74% of 2025 sales sat under a contractual agreement, which stabilises the relationship without creating demand; a contract governs what a bolt costs, not whether the plant needs one.

The competitive story also carries a stated erosion path. The annual report concedes that easier and quicker discovery of what things cost, and the aggressive selling methods that follow, "could have the effect of eroding our gross and/or operating income profit and/or percentage over time". The installed-base opportunity rests on the company's own sizing of its market, and the filing is candid about what happens if that sizing is generous: "If we have overestimated the size of our market, and in doing so, underestimated our current share of it, the size of our opportunity for growth may not be as significant as we currently believe".

None of this says the business is worse than it looks. It says the quote is a bet that a cyclical distributor holds a peak-cycle margin while its gross line slips and its input costs rise, then compounds from there at roughly double the rate it currently runs.

Valuation

Begin with the demand sitting inside today's level, because on this company it is unusually explicit. The market is paying roughly 31 times company-wide operating income, which works out to operating profit compounding about 28% a year across a five-year stage. Against a business whose operating margin moved twenty basis points in 2025 and whose sales line grows in the low teens, that is a long way from the run rate.

What makes the requirement demanding rather than merely optimistic is how rarely it has been met. Measured against Fastenal's own record, the assumed pace runs well above what the company has actually delivered. Measured against the peer group, the multiple sits at the very top of the distribution, past its upper quartile. And of comparable fast growers, only about 26% held that pace for anything like five years.

The methods offer no second opinion. Every family lands below the current level: the asset-value lenses by roughly four times, the earnings-power lenses by about three and a half, and the peer-multiple and forward-growth families by around two. Even the forward-growth method that comes closest gets there by holding today's exit multiple flat through a six-year projection and then applying it at the end. When no family reaches the quote, the premium is not a durability read that the static frames structurally cannot see. It sits outside what all of them encode.

Part of that gap does have an honest explanation, and it belongs in the same breath. A distributor earning 45.0% gross and 20.2% operating margins is not being valued like a distributor because it does not earn like one. GWW, the largest peer at 18.38 billion dollars of revenue, converts 14.2% of sales into operating profit; MSM converts 8.5%; WCC converts 5.3%. Sector-multiple methods apply the sector's economics to a company that does not have them, which is exactly why the peer-multiple family reads so far under. That accounts for a portion of the distance. It does not account for a requirement of 28% compounding.

The revenue mix is worth naming because it bears on how durable that spread is. United States selling locations produced 1,816.3 million dollars of the first quarter of 2026, or 82.5% of revenues, with Canada and Mexico at 306.3 million. And the relationships behind those sales are contracted rather than transactional: "Approximately 74% of our consolidated sales in 2025 were with customers whose spend was subject to a contractual agreement between ourselves and the customer." A contracted base makes the margin more defensible than a catalogue business would be. It does not accelerate it.

The balance sheet neither helps nor hurts much. On funded borrowings the company holds a small net cash position of 183.6 million dollars, and operating profit covers the interest bill roughly 273 times over; counting lease obligations the position tips slightly the other way, which changes nothing about the ability to fund itself. The share count has drifted down about 0.1% a year since early 2022. There is no leverage here to amplify a disappointment and no reserve to absorb one, which puts effectively the whole outcome in the growth line.

Catalysts

Second-quarter results landed on July 14, 2026, and the operating line kept its shape. Operating income for the quarter came to 501.8 million dollars against 436.1 million a year earlier, taking the first half to 949.4 million from 830.0 million. That is growth in the mid teens, delivered without heroics, and it is the number against which the compounding embedded in the quote has to be judged.

Capital return continued on schedule. The board declared a dividend of 26 cents a share on July 10, 2026, and the company published its 2026 Impact Report on July 8, 2026 covering the year ended December 31, 2025. Neither is a surprise, which is rather the point with this name: the events that move it are quarterly operating prints, not announcements.

The variable worth tracking through the back half of the year is cost pass-through. The first-quarter filing flagged that inventory bought before the latest tariff round is being worked off and replaced with goods carrying higher duties, so the effect shows up with a lag rather than all at once. It will show up in the gross line. As a share of net sales, that line has already stepped down from 45.1% in the first quarter of 2025 to 44.6% a year later. Whether SG&A leverage can keep absorbing the difference is the operating question the next two prints will answer.

Peer Cohorts (Per Segment, With Filing Citations)

Twelve-month Period (reported)

• GWW (W.W. GRAINGER, INC.)
• FY2025 10-K: …☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐ Indicate by check mark whether the registrant has filed a report…
• FY2025 10-K: …satisfied when control of the product is transferred to the customer per the arranged shipping terms. Some Company contracts contain a combination of product sales and services, which are distinct and accounted for as separate performance obligations and are satisfied when the services are rendered. Total service…
• MSM (MSC INDUSTRIAL DIRECT CO., INC.)
• FY2025 10-K: …such as vending and in-plant programs, and the rate of new customer implementations. Our strategy is to position ourselves as a mission-critical partner to our customers. We intend to selectively pursue strategic acquisitions that expand or complement our business in new and existing markets or further enhance the…
• FY2025 10-K: …the sale price to the Company's customers and the product cost from its suppliers (net of earned rebates and discounts), including the cost of inbound freight. The cost of outbound freight (including internal transfers), purchasing, receiving and warehousing are included in operating expenses. Vendor Consideration…
• WSO (WATSCO INC)
• FY2025 10-K: …definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. Large accelerated filer  Accelerated filer  Non-accelerated filer  Smaller reporting company  Emerging growth company  If an emerging growth company,…
• FY2025 10-K: …and Incentive Plan dated January 31, 1996 by and between Watsco, Inc. and Albert H. Nahmad (filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 and incorporated herein by reference). * 10.1 (n) Thirteenth Amendment dated January 1, 2012 to Employment Agreement and Incentive…
• AIT (APPLIED INDUSTRIAL TECHNOLOGIES, INC.)
• FY2025 10-K: …vary by the type and location of the customer and the products or services offered. The Company does not adjust the promised amount of consideration for the effects of significant financing components based on the expectation that the period between when the Company transfers a promised good or service to a customer…
• FY2025 10-K: …subsidized by the Company. The Company recorded net periodic benefits associated with these plans of $ 115 , $ 186 , and $ 113 in fiscal 2025 , 2024 , and 2023, respectively. The Company has determined that the related disclosures under ASC Topic 715 - Compensation, Retirement Benefits, for these post-employment…
• WCC (WESCO International, Inc.)
• FY2025 10-K: …which could potentially affect our liquidity. We believe cash provided by operations and financing activities will be adequate to cover our operational and business needs for at least the next twelve months. We communicate on a regular basis with our lenders regarding our financial and working capital performance,…
• FY2025 10-K: …No þ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing…
• BLDR (Builders FirstSource, Inc.)
• FY2025 10-K: …with certain provisions effective in the Company's fiscal 2025 and others becoming effective in fiscal 2026. With further guidance from the U.S. Treasury and IRS expected, the Company is continuing to analyze the full impact of the Act on the Company's financial statements and related disclosures. We anticipate the…
• FY2025 10-K: …have reflected, and are expected to continue to reflect, fluctuations from period to period arising from the following: • The cyclical nature of the homebuilding industry; • General economic conditions in the markets in which we compete; • The volatility of lumber prices; • The pricing policies of our competitors; •…
• TSCO (TRACTOR SUPPLY CO /DE/)
• FY2025 10-K: …card or merchandise return card is redeemed by the customer and recognizes income when the likelihood of the gift card or merchandise return card being redeemed by the customer is remote (referred to as "breakage"). The gift cards and merchandise return cards breakage rate is based upon historical redemption patterns…
• FY2025 10-K: …covenants restricting the Company's ability, subject to certain exceptions, to incur debt secured by liens, to enter into sale and leaseback transactions or to merge or consolidate with another entity or sell substantially all of its assets to another person. At any time prior to February 15, 2033 (three months prior…
• FND (Floor & Decor Holdings, Inc.)
• FY2025 10-K: …the other property and assets of Outlets and the other guarantors that secure the Term Loan Facility on a first-priority basis. As of December 25, 2025, net availability under the ABL Facility was $ 660.5 million as reduced by letters of credit of $ 38.1 million. Covenants The credit agreements governing the Term…
• FY2025 10-K: 5-09-26 2025-12-25 Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 25 , 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.