Fastenal (FAST)
Industria / Distribución MRO
Fastenal is an MRO distributor of exceptional quality -return on invested capital of ~34% and an unlevered balance sheet- but its current multiple (~43x TTM earnings) trades well above the ceiling of the archetype band (24x): Overvalued with an estimated total return of -3% annually over 5 years in the base case, which suggests the price already requires growth and margin to keep surprising to the upside.
- Price
- $50.49
- Intrinsic value (5y, base)
- $37
- Total annual return (5y)
- -3.0%
- Status (nominal)
- Overvalued
- Margin of safety
- No margin
The essentials
- Return on invested capital of ~34% TTM, well above the 10% bar, with positive working capital and virtually no debt.
- TTM growth of 12.5% includes a pricing component of ~290bp tied to tariffs that will likely normalize toward a path of ~6-9% annually.
- The current price (~43x TTM earnings) trades well above the ceiling of the archetype band (24x), implying multiple compression in all three modeled scenarios.
Intrinsic value — two valuation methods
Total return at 5 years: -3.0%/year = -6.1% appreciation + 3.1% dividend. The target price ($37) is ex-dividend; the $7 in dividends collected over 5 years are added separately.
By both methods, the value today (DCF $34 · Multiples $36) is below the market price ($50).
Pillars of the analysis
The verdict — today vs 5 years
Today — expensive, no margin of safety: at $50 trades ~42.1% above its value discounted to today (~$36); 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 ~$23.
Thesis
The business
Fastenal is an MRO industrial distributor of exceptional quality: return on invested capital of ~34% TTM, no material financial leverage, with a narrow, stable moat sustained by logistics scale and switching costs from customer-site managed inventory (FMI). Recent growth (12.5% TTM) includes an elevated tariff-linked pricing component that will likely normalize toward a more moderate path.
The valuation
Valued on a P/E basis over normalized net income, with a terminal multiple of 29× within the industrial and maintenance distribution archetype band (18x-24x), reflecting the business's exceptional quality and its stable moat. The 5-year value in the base case is $37 per share.
The margin of safety
No margin of safety: the price already discounts a demanding scenario. The current price trades at approximately 43 times trailing-twelve-month net income, well above the ceiling of the archetype band (24x), implying multiple compression under any of the three modeled scenarios, including the favorable one.
What to watch
The key disconfirmer is whether the deceleration of the tariff-linked pricing contribution (~290bp in the second quarter of 2026) is offset by a sustained pace of share gains in high-spend sites and Digital Footprint penetration; if not, growth converges faster toward the adverse scenario.
Educational / informational. Does not constitute investment advice.