FASTENAL CO (FAST): what the price requires
At today's price, FASTENAL CO (FAST) is priced for +27.8% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/FAST
Headline
| Field | Value |
|---|---|
| Ticker | FAST |
| Company | FASTENAL CO |
| Current price | $46.64/sh |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 11.8% |
| Operating margin today | 20.5% |
| Margin compression implied | -8.7pp |
| Implied growth | 27.8% |
| Multiple paid | 31x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 9.1% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7.2pp.
How unusual the bet is: high
| Reference | Value |
|---|---|
| vs own history | +2.24σ |
| cohort percentile (of 210 peers) | 84 |
| sustained it ~5 years at this level | 26% |
| implied end-window share | 0% |
Valuation X-Ray
Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).
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.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 3.82x | 5 | expensive |
| Earnings | 4.35x | 3 | expensive |
| Relative | 2.04x | 3 | expensive |
| Growth | 1.11x | 3 | expensive |
Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative
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=14)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $25.18 | 1.85x | yes | FCF base $1.2B, growth 11% (input: historical growth), terminal g 4.0%, WACC 9.2%, 6yr projection |
| DCF Exit Multiple | Growth | $47.70 | 0.98x | yes | Exit EV/EBITDA: 26.5x / 28.5x / 30.5x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $31.48 | 1.48x | yes | P/E 26.39x (blended: static sector reference 20x + trailing (TTM) 41x), scenarios: 21.8x / 26.4x / 31.0x (bear / base = reference held flat / bull), EV/EBITDA 18.35x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $12.21 | 3.82x | yes | BV/sh $3.47, ROE (TTM) 32.6%, ke 9.3% |
| Two-Stage Excess Return | Asset | $24.04 | 1.94x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $42.16 | 1.11x | yes | Rev $8.4B, growth 11% (input: historical growth; tapered), Terminal P/S: 5.3x / 6.4x / 7.5x (bear / base = today's held flat / bull, cap 8x) |
| Growth-Adjusted P/E | Relative | — | — | no | — |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $10.72 | 4.35x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $1.51B × (1−24%) / WACC 9.2% → EPV (no growth) |
| Residual Income | Asset | $18.84 | 2.48x | yes | BV $3.47 + 5yr PV of (ROE (TTM) 32.6% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $8.24 | 5.66x | yes | √(22.5 × EPS $0.87 × BVPS $3.47) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $22.83 | 2.04x | yes | EBITDA $1.89B × sector EV/EBITDA 14.0x |
| FCF Yield | Earnings | $10.79 | 4.32x | yes | FCF $1163.5M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | $0.73 | 63.89x | yes | EPS $0.87 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median) |
| ROIC-Justified P/B | Asset | $3.09 | 15.09x | yes | BV $3.47 × (ROIC 8.2% / WACC 9.2%) |
| P/Sales Sector | Relative | $11.00 | 4.24x | yes | Revenue $8.44B × sector P/S 1.5x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $9.41 | 4.96x | yes | EPS $0.87 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net cash | $183.6m |
| Net debt / NOPAT (after-tax) | -0.14x (net cash) |
| Net debt / operating income (pre-tax) | -0.11x (net cash) |
| Interest coverage | 272.9x |
| Share count CAGR (buyback) | -0.1% |
| Burning cash | no |
Bullet Takeaways
- Fastenal sells nuts, bolts, and industrial supplies, but its real product is embedded inventory: vending machines and smart bins installed inside customers' plants that reorder automatically, and those managed-inventory channels now run close to half of sales, which is what makes the business sticky.
- The earnings trajectory is strong: Q1 2026 net sales rose 12.4% daily to $2.20 billion, operating margin widened to 20.3%, EPS rose 13.6% to $0.30, and operating cash flow jumped 44.3% to 111.4% of net income.
- The clearest risk is the price: at roughly 30 times operating profit the stock sits at the top of its peer group, pricing durable high-teens compounding that only the forward-growth lens reaches, while gross margin slipped to 44.6% on price-cost pressure.
Bull Case
The trajectory is the bull case, and it is pointing the right way on every line that matters. In the first quarter of 2026 Fastenal grew net sales 12.4% on a daily basis to about $2.20 billion, its third straight quarter of double-digit growth, while operating margin edged up to 20.3% from 20.1% and diluted EPS rose 13.6% to $0.30. Underneath the headline, the momentum is broad: manufacturing demand rose more than 12% and non-residential construction more than 17%, and the growth carried a 3.5-percentage-point pricing uplift, evidence the company is passing through cost rather than absorbing it. Revenue accelerating, margins widening, and earnings outpacing sales is the combination that tells you a distributor is gaining share, not just riding a cycle.
The cash trajectory is even stronger than the income statement. Operating cash flow jumped 44.3% to $378.4 million, equal to 111.4% of net income, as the company tightened inventory while still growing. A business converting more than a dollar of cash for every dollar of reported profit, while compounding sales at double digits, is the financial signature of a high-quality operator, and it explains how Fastenal funds growth, dividends, and a stable share count without leaning on debt. Interest coverage runs into the hundreds of times; this is a balance sheet with no financial risk to speak of.
What makes the trajectory durable is the product hiding inside the boxes of screws. Fastenal's real offering is embedded inventory, the vending machines and smart bins it installs inside customers' plants that reorder automatically. The 10-K describes the Fastenal Managed Inventory program as technology that "allow[s] us to put physical product closer to the point of use in a customer location, increase the visibility of a customer's supply chain", and notes that growth initiatives drove meaningful sales growth in 2025. Those managed-inventory channels now run close to half of sales, which is what converts a commodity distribution business into a sticky, share-gaining one whose earnings momentum compounds rather than fades.
Bear Case
The fragile assumption is not whether Fastenal is a good business; it is how long it can keep growing the way it just did. The price is built on durability, and durability is precisely the thing the recent record cannot prove, only promise. At today's level the market pays roughly 30 times operating profit for a distributor, a multiple that requires the company to keep compounding at a pace and margin well above what most distributors sustain, for years. The price embeds growth that ranks among the rarest outcomes against both the company's own history and its cohort of fast-growers. The bet is not that next quarter is good; it is that the next half-decade looks like the last one, and persistence at that level is what history most reliably erodes.
The first quarter showed where the strain is already visible: gross margin. The prices Fastenal pays rose faster than the prices it charges, and gross margin slipped to 44.6% from 45.1% on price-cost pressure and customer mix. The company offset it by spreading fixed costs over higher sales, which works while volumes climb but is a different kind of margin support than pricing power. A genuine moat lets a company pass cost through cleanly; here the pass-through was incomplete, and the operating-margin gain came from leverage rather than from holding the gross line. If volume growth cools, the leverage that papered over the gross-margin squeeze cools with it, and the narrative of a relentless compounder meets a more ordinary distributor.
The valuation evidence makes the dependency explicit. The methods grounded in what Fastenal earns and owns today, asset value, earnings power, and peer multiples, all read the stock as richly valued, each landing far below the price. Only the forward-growth lens reaches today's level, and it reaches it solely by crediting years of high-teens compounding in advance. That is the whole bet in one sentence: strip out the assumption of durable, above-cohort growth, and there is no standard frame that supports the price. The bull says the embedded-inventory moat earns that durability. The bear says the price has already paid for a persistence that the static methods, and the gross-margin trend this quarter, do not yet confirm.
Valuation
Start with what the price is betting, because for Fastenal the bet is the entire story. At about $44.73 (as of June 11, 2026) the market pays roughly 30 times operating profit for an industrial distributor, and to support that the business has to keep compounding at a pace and margin well above what it has demonstrated on average, sustained for years. The embedded assumption is a duration bet: high-teens operating growth holding for years, a persistence that ranks among the rarest outcomes against the company's own record and its cohort of fast-growing peers. The rate the company can hit in a strong quarter; the length of the runway is the demanding part.
The disagreement among the methods is stark and one-directional, and that is the signal. The asset-value, earnings-power, and peer-multiple lenses all read the stock as richly valued, each landing well below the price. Only the forward-growth lens reaches today's level. That pattern is what a moat or durability premium looks like in the numbers: the static frames structurally cannot price years of compounding, so when only the growth lens reaches the price, the market is paying for durability the other methods cannot see. The honest read is that on everything Fastenal has already earned and owns, the stock is expensive, and the whole case for the price is the forward growth holding for the duration the price implies.
Solvency removes itself from the downside entirely, which is part of what justifies a premium: Fastenal carries net cash, interest coverage in the hundreds of times, and a share count that barely moves, funding growth and dividends from its own cash flow. So the decisive variable is not the balance sheet; it is the durability of the growth and the gross margin. If the embedded-inventory franchise keeps gaining share and the company holds its margins, the forward-growth lens is right and the price is earned. If growth normalizes toward the distributor cohort and the gross-margin pressure persists, the static methods calling it richly valued are the honest anchor, and the premium has a long way to fall to reach them.
Catalysts
Fastenal reported first-quarter 2026 results on April 13, for the quarter ended March 31. Net sales rose 12.4% year over year on a daily basis to about $2.20 billion, a third consecutive quarter of double-digit growth, and net income rose to $339.8 million from $298.7 million, with diluted EPS up 13.6% to $0.30. Operating margin edged up to 20.3% from 20.1% as SG&A leverage more than offset a gross-margin decline to 44.6% from 45.1%, driven by price-cost pressure and customer mix. The growth was broad, with manufacturing demand up 12.3% and non-residential construction up 17.2%, and it carried a 3.5-percentage-point pricing uplift plus a small foreign-exchange tailwind.
The cash story stood out inside the print. Operating cash flow climbed 44.3% to $378.4 million, equal to 111.4% of net income, supported by tighter inventory management, the kind of conversion that funds the dividend and growth without debt. The signing of new managed-inventory contracts and the continued penetration of vending and onsite programs are the operating drivers behind the share gains, and the company's growth initiatives drove meaningful sales growth in the prior year.
The forward signals to watch are the trajectory of gross margin against the price-cost squeeze, the pace of managed-inventory installations, and whether the double-digit daily-sales growth holds as comparisons get tougher. Those metrics determine whether the durable, above-cohort compounding the price assumes actually persists, which is the single question the elevated multiple turns on.
Peer Cohorts (Per Segment, With Filing Citations)
Twelve-month Period (reported)
- GWW (W.W. GRAINGER, INC.)
- (no filing in the citation store)
- MSM (MSC INDUSTRIAL DIRECT CO., INC.)
- (no filing in the citation store)
- WSO (WATSCO INC)
- (no filing in the citation store)
- AIT (APPLIED INDUSTRIAL TECHNOLOGIES, INC.)
- (no filing in the citation store)
- WCC (WESCO International, Inc.)
- (no filing in the citation store)
- BLDR (Builders FirstSource, Inc.)
- (no filing in the citation store)
- TSCO (TRACTOR SUPPLY CO /DE/)
- (no filing in the citation store)
- FND (Floor & Decor Holdings, Inc.)
- (no filing in the citation store)
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.
- 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.
Sources
Fastenal Q1 2026 earnings release, April 13, 2026