International Business Times: A Long-Term Champ That is Not a Tech Name
January 23, 2024 —
Fastenal, slow and steady
Growth stocks aren’t the only ones that go up. Running Point and I were quoted by International Business Times in an article — by Panos Mourdoukoutas, PhD, “Fastenal: A Long-Term Winner Beyond The Magnificent Seven” — regarding Fastenal Company, a wholesaler and retailer of industrial and construction supplies, products, and services including fasteners, cutting tools, metal working, lifting, hardware, plumbing, lubricant, and other related products as well as custom sling fabrication, inspection, custom packaging, calibration, tool repair, and delivery.
Fastenal lubricates supply chains
Fastenal helps supply chains work better by supplying parts and services on demand. The company has been a hidden gem; a consistently performing stock that has surpassed many more widely recognized technology names over the past couple decades. While it trades at 5 times sales and carries a relatively high price to equity (PE) ratio of 34, it boasts low debt and an impressive return on equity (ROE).
The company’s adept cost management and effective execution resulted in slightly stronger-than-expected fourth-quarter profitability, despite a perceived softening in the manufacturing environment, indicated by a Purchasing Managers’ Index (PMI) below 50.
Note: PMI is a widely used economic indicator that measures the direction of manufacturing and services sector trends. A PMI value above 50 generally indicates economic expansion, while a value below 50 suggests contraction.
Fastenal’s strengths lie in its expansive scale, growing digital presence, branch and onsite business operations, supply solutions, NHL multiyear global partnership, Roush Fenway Racing (RFR) sponsorship, and a proven track record of successful execution, all contributing to growth rates that outpace the market average.
An area warranting close attention is the Daily Sales Rate (DSR) Growth, which has experienced a decline over the last couple years; monitoring this trend will be crucial for a comprehensive assessment of Fastenal’s performance.
Quoted article excerpts are below:
Michael Ashley Schulman, CFA, likes Fastenal’s financials. “Fastenal is a sleeper of a stock that has outperformed many better-known technology names over the last five and 20 years,” he told International Business Times. “It trades five times sales but has a lofty PE of 34. However, debt is low, and ROE is a very respectable 35.5. Cost discipline and solid execution drove slightly stronger-than-anticipated 4Q profitability due to a softening manufacturing environment with PMI below 50.”
“Fastenal’s extensive scale, growing digital presence, branch and onsite business (at end-customer locations), supply solutions, NHL partnership and robust track record of successful execution have contributed to growth rates surpassing the market average,” Schulman added.
Still, Schulman is concerned about slowing down the company’s growth. “One thing to observe is their Daily Sales Rate (DSR) Growth, which has been declining over the last nine quarters,” he said.
“The line between disorder and order lies in logistics.”
Disclosure: The opinions expressed are those of Running Point Capital Advisors, LLC (Running Point) and are subject to change without notice. The opinions referenced are as of the date of publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Forward-looking statements cannot be guaranteed. Running Point is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Running Point’s investment advisory services and fees can be found in its Form ADV Part 2, which is available upon request. RP-24-09