Is Fastenal Stock Overpriced?
3/6/2012 12:59:00 AM
FEATURE
Most stock analysts are keen on Fastenal Co. stock.
BusinessWeek rates the Winona, MN-based fastener supplier as the best-performing stock over the past 25 years in what’s known as the Russell 1000.
And in the past year Fastenal shares have gained 69%.
“In the past decade, FAST has experienced just two down years — 7.3% in 2006 and 11.8% in 2008,” reports Will Ashworth of InvestorPlace. “Although it can’t seem to lose, all good things must come to an end. While the stock isn’t a top short candidate, maybe it should be — it’s just too darn expensive.”
Ashworth is quick to note Fastenal’s successes, including 28% share growth each year since 1987, consistent revenue and profit growth, and innovation — the company has installed 7,500 vending machines at its customers’ plants.
“Whatever FAST’s fair value, I can’t help but marvel at its performance. It’s all-world for sure.”
But concerns about free cash flow, low dividends and share value outstripping earnings growth have this analyst concerned about Fastenal’s potential as a solid investment.
“The bottom line: Fastenal management is asking investors to trust them to keep moving the stock forward as they have in the past,” writes Ashworth. “For investors who currently own the stock and have made a lot of money from it, the decision’s an easy one: Sell now before the whole world realizes that this type of business should never have an enterprise value 25 times EBITDA.”
“For those who haven’t bought just yet, buyer beware.”
MEDIA SPOTLIGHT — Most stock analysts are keen on Fastenal Co. stock.
BusinessWeek rates the Winona, MN-based fastener supplier as the best-performing stock over the past 25 years in what’s known as the Russell 1000.
And in the past year Fastenal shares have gained 69%.
“In the past decade, FAST has experienced just two down years — 7.3% in 2006 and 11.8% in 2008,” reports Will Ashworth of InvestorPlace. “Although it can’t seem to lose, all good things must come to an end. While the stock isn’t a top short candidate, maybe it should be — it’s just too darn expensive.”
Ashworth is quick to note Fastenal’s successes, including 28% share growth each year since 1987, consistent revenue and profit growth, and innovation — the company has installed 7,500 vending machines at customer plants.
“Whatever FAST’s fair value, I can’t help but marvel at its performance. It’s all-world for sure.”
But concerns about free cash flow, low dividends and share value outstripping earnings growth have this analyst concerned about Fastenal’s potential as a solid investment.
“The bottom line: Fastenal management is asking investors to trust them to keep moving the stock forward as they have in the past,” writes Ashworth. “For investors who currently own the stock and have made a lot of money from it, the decision’s an easy one: Sell now before the whole world realizes that this type of business should never have an enterprise value 25 times EBITDA.”
“For those who haven’t bought just yet, buyer beware.”
Editor’s Note: Articles in Media Spotlight are excerpts from publications or broadcasts which show the industry what the public is reading or hearing about fasteners and fastener companies. ©2012 GlobalFastenerNews.com
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