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The Fastenal Company
by Todd BuntonFebruary 09, 2012 | Comments : 0 Recommended this article: (0)
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It is a Zacks #2 Rank (Buy) stock.
Analysts project this strong growth to continue over the next couple of years. Based on consensus estimates, analysts expect 21% EPS growth this year and 19% growth next year.
On top of this, the company pays a dividend that yields a solid 1.4%.
Fastenal is a leader in the wholesale distribution of industrial and construction supplies. It operates 2,585 stores primarily in North America.
It is headquartered in Winona, Minnesota and has a market cap of $14.4 billion.
Fourth Quarter Results
Fastenal reported strong fourth quarter results on January 18. Net sales rose 22% year-over-year to $697.8 million, ahead of the Zacks Consensus Estimate of $693 million. Same-store sales (those open more than 2 years) grew an impressive 18%.
The gross profit did contract a bit, however, from 52.0% to 51.2%. But this was more than offset by a decline in operating and administrative expenses, from 33.4% to 31.0% of net sales. Operating income increased 32% year-over-year.
Earnings per share was up 36% over the same period to 30 cents, in-line with the Zacks Consensus Estimate.
Although EPS was in-line with expectations, analysts raised their estimates going forward, sending the stock to a Zacks #2 Rank (Buy). Analysts expect the company's strong top-line growth to continue, leading to margin expansion and strong double-digit EPS growth over the next couple of years.
The Zacks Consensus Estimate for 2012 is now $1.46, representing 21% growth over 2011 EPS. The 2013 consensus estimate is currently $1.74, corresponding with 19% growth.
In addition to strong growth, Fastenal pays a dividend that yields 1.4%. Going back to 2000, the company has increased its dividend at a compound annual rate of 42%:
It generates strong free cash flow and has no debt, so expect this dividend to continue climbing.
Shares of FAST have climbed over 50% since early October. This has led to an increase in valuation multiples as well.
The stock currently trades at 32x forward earnings, a premium to its 10-year median of 27x. Its price to book ratio of 9.7 is also above its historical median of 6.4.
The Bottom Line
Although it might not be a screaming value, the stock could still show strong performance over the next few weeks or months, particularly if economic data in the U.S. continues to improve.
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