Fastenal (FAST)

Total return at 5 years: -3.7%/year = -6.8% appreciation + 3.1% dividend. The target price ($36) is ex-dividend; the $7 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $34 · Multiples $35) is below the market price ($51).

Today — expensive, no margin of safety: at $51 trades ~46.9% above its value discounted to today (~$35); the expected return does not even reach the risk-free rate (4.5%).

At 5 years — Sobrevalorado: the expected total return is negative — the price already discounts a demanding scenario that, if not met, results in a loss.

The bridge: the return at 5 years falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$22.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($51) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The price discounts growth (18.2%/year) above our base case (8.4%/year) → it is priced for a demanding scenario and leaves little cushion against a slowdown.

That growth implies ~$2.8 bn of owner earnings in year 5 (vs ~$1.8 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). The flow is returned almost in full (dividend + buyback) or redeployed into the operation, so that EV stays roughly flat and multiples compress because the metric grows, not because of cash accumulation. The valuation is done on Resultado operativo (EV/EBIT). In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

The valuation applies a multiple to normalised operating income (base year = TTM to 30-Jun-2026), at the enterprise level: the cash (US$204.7 million) and the debt (US$120 million) belong to the business and enter the bridge, even though leverage is practically nil and the net figure comes to US$85 million of cash. TTM: revenue US$8,749.4 million, EBIT US$1,775.1 million, net income US$1,352.0 million. The combined XBRL depreciation and amortisation tag (us-gaap:DepreciationDepletionAndAmortization) was frozen at the fiscal 2025 close (US$179.2 million), with no facts after 30-Jun-2026, so real TTM depreciation (US$179.6 million) was rebuilt by adding the separate cash flow statement lines: FY2025 (US$179.2 million, from the 10-K) plus the 2026 half-year (US$90.2 million) minus the 2025 half-year (US$89.8 million), both from the second-quarter 2026 8-K. Maintenance capital expenditure was separated from the total (US$243.3 million TTM) via Greenwald: (net PP&E/revenue) × Δrevenue ≈ (US$1,131.6M/US$8,200.5M) × US$548.9M ≈ US$75.8 million of growth capital expenditure, leaving ~US$167.6 million of maintenance, close to the corrected depreciation. The 14-Jul-2026 release carries no formal revenue or earnings per share guidance for 2026 (Fastenal does not publish that kind of guidance); only capital expenditure guidance (US$310-330 million, used as the year-1 anchor) and FMI device signings (27,000-29,000 MEU). Year 1 of the revenue path is therefore anchored to the 3-4 year trajectory (2.7%-12.5% year over year) normalised to ~9%, recognising that a good part of the 12.5% TTM figure is an elevated price component (~290bp in Q2 26) tied to tariffs that will probably normalise. The terminal exit multiple (15.7× in the base case, within the 14× to 18× band for industrial distribution of consumables) reflects an exceptional return on capital (~34% in the TTM) tempered by a narrow moat of stable direction. Share buybacks (US$50.3 million TTM, less than 0.1% of market capitalisation) are immaterial (less than 1% a year) and are not modelled with a sharesPath; with a dividend payout of ~78% of earnings, cash does not accumulate (accumulateCash: false).

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $36 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $51, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $36 in 5 years plus $7 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $35. Against the current market price ($51), the margin of safety is -46.9% (trades above the maximum → a premium is paid) and the total return at that price would be -3.7% annually.

• Entry multiple. 33× operating income over the last twelve months, well above the ceiling of the archetype band (18×).
• Margin of safety. No margin of safety: the price already discounts a demanding scenario.
• Total return. The base case projects -4% annually over 5 years, with the dividend contributing a smaller fraction of the return.
• Consistency with the band. Even the favorable scenario (24x, ceiling of the band) is just below the current price 5 years out.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✓ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (94%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Return on invested capital. ~34% TTM, well above the 10% bar, with positive working capital.
• Cash generation. TTM OCF of US$1,399 million comfortably covers guided 2026 capex.
• Reinvestment runway. Guided capex rises to US$310-330 million for 2026 for distribution center replacement and automation, with a proven historical return.
• Earnings quality. TTM net income is backed by cash: TTM OCF exceeds TTM net income.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

The operating drivers combine year-end data (FY24/FY25 for Digital Footprint and US$50,000+ sites) with second-quarter 2026 data to reflect the most recent level available in the earnings release; the June 2026 site count is a quarterly average, not a period-end cut, so it is not strictly comparable year-over-year with the fiscal-year-end data.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Digital Footprint. 62.4% of sales in Dec-2025, with a stated target of 66% for 2026.
• FMI (managed dispensing). 140,789 devices installed as of Jun-2026, +6.5% year-over-year, with a target of 27,000-29,000 new signings in 2026.
• High-spend sites. Sites with US$50,000+ monthly spend grew 14.0% year-over-year at the end of FY25.
• Sustainability of the current pace. The 12.5% TTM includes ~290bp of tariff-linked pricing that will likely normalize.

• Demand recurrence. Consumable supplies (fasteners, safety, MRO) with constant replenishment in manufacturing and construction.
• Pricing power. ~185-290 basis points of pricing contribution in recent periods, with no apparent volume loss.
• Behavior in recessions. Growth decelerated to 2.7% in FY24 during an industrial destocking cycle, without turning negative.
• Operating leverage. Moderate: SG&A has a high fixed local-personnel component that limits margin expansion during slowdowns.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Leverage (net debt / EBITDA)Net cash $0.1 bn
• ✓Interest coverage (EBIT / interest)394.4x
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 94% of ROIC
• ✓Value creation (ROIC − 10% bar)+24pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 1.4x
• !Float / working capitalConsumes cash $0.1 bn (positive WC)
• ✓Dilution (SBC % of revenue + shares)SBC 0.1% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Leverage. Total debt of just US$120 million vs. US$4,069 million of equity: virtually unlevered.
• Liquidity. Cash of US$204.7 million amply covers current debt of US$70 million.
• Interest coverage. TTM interest expense (~US$4.5 million) is immaterial against EBIT of US$1,775 million.
• Dependence on third parties. A single supplier accounted for more than 5% of inventory purchases in 2025, concentrating supply risk.

How cash comes in and how it is deployed. In green, the business's own cash (the owner-FCF it generates and reinvests); in gray, the float and credit — customer and funding money, which is not the shareholder's.

The dividend payout (~78% of TTM earnings) dominates capital allocation; share buybacks were zero during 2024 and 2025 and resumed modestly in the first half of 2026 (US$50.3 million), with no material acquisitions in the period.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Alignment. The group of directors and executives owns less than 1% of the shares; insider ownership is low for a company of this size.
• Leadership transition. Daniel Florness left the CEO role and the board on Jul-16-2026 after nearly a decade; succeeded by Jeffery Watts, with 30 years at the company.
• Capital allocation. Dividend payout of ~78% of earnings, buybacks resumed only in 2026, and no material acquisitions in the period.
• Candor. The filing itself explicitly acknowledges structural gross margin compression, without presenting it as transitory.

• Recent pricing power and share gains with large accounts support an elevated multiple, but that performance is already reflected in the current price.
• The filing itself acknowledges that the market assigns it a premium over the industrial sector for its growth and profitability track record, with no guarantee it holds if execution slows.
• No clear source of missing buyers or motivated sellers is identified: there was no restructuring or accounting impairment, the stock is not out of coverage.

Without an identifiable source of discount, the reading is one of caution: the price appears to require growth and margin to keep surprising to the upside, rather than offering a gap between perception and reality.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at -10%/year (-40% total): the margin of safety protects the downside. The bull (+1%/year, +5% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• CEO transition. Risk disclosed in the filing itself regarding continuity of oversight after Florness's departure.
• Gross margin compression. The mix shift toward non-fastener products and contractual accounts will continue to pressure gross margin.
• Tariff exposure. Supply chain concentrated in Asia; the tariff environment is described as highly fluid in the filing.
• Demanding multiple. The market price trades well above the archetype's terminal exit band in all three scenarios.
• Historical volatility. The filing discloses that the stock has traditionally had high price volatility and depends on sustaining the premium multiple over the industrial sector.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A narrow moat and ROIC 34% above the 10% bar, but the price sits above value (no margin) → great business, expensive.

• Peter Lynch Growth at a reasonable price (GARP)

  A fast grower growing 8% at a multiple/growth of 4.0 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 3% (EBIT/EV) + ROIC 34% → falls outside the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts 18% vs our 8%: priced for perfection, no favorable mispricing.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -13%/yr over 5y (material loss) → risk of permanent capital loss.

• Pat Dorsey Moat strength (Five Rules)

  A narrow moat, stable; sources: efficient scale, switching costs, intangibles, cost advantage → partially passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  The price demands 18% growth, far above our 8% — heroic assumptions.