Fastenal trades at $44.76 and has moved in lockstep with the market. Its shares have returned 11.5% over the last six months while the S&P 500 has gained 10.3%.
Is now the time to buy FAST? Find out in our full research report, it’s free.
Why Does FAST Stock Spark Debate?
Founded in 1967, Fastenal (NASDAQ: FAST) provides industrial and construction supplies, including fasteners, tools, safety products, and many other product categories to businesses globally.
Two Things to Like:
1. Rising Sales Volumes Show Elevated Demand
Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful Maintenance and Repair Distributors company because there’s a ceiling to what customers will pay.
Fastenal’s units sold punched in at 137,702 in the latest quarter, and over the last two years, averaged 9.1% year-on-year growth. This performance was solid and shows there is something unique about its offerings. 
2. Elite Gross Margin Powers Best-In-Class Business Model
All else equal, we prefer higher gross margins because they make it easier to generate more operating profits and indicate that a company commands pricing power by offering more differentiated products.
Fastenal has best-in-class unit economics for an industrials company, enabling it to invest in areas such as research and development. Its margin also signals it sells differentiated products, not commodities. As you can see below, it averaged an elite 45.5% gross margin over the last five years. That means Fastenal only paid its suppliers $54.49 for every $100 in revenue.
One Reason to Be Careful:
Lackluster Revenue Growth
We at StockStory place the most emphasis on long-term growth, but within industrials, a stretched historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Fastenal’s recent performance shows its demand has slowed as its annualized revenue growth of 6.9% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs. 
Final Judgment
Fastenal has huge potential even though it has some open questions, but at $44.76 per share (or 35.1× forward P/E), is now the time to initiate a position? See for yourself in our full research report, it’s free.
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