Fastenal’s 16.6% return over the past six months has outpaced the S&P 500 by 11.8%, and its stock price has climbed to $52.33 per share. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.

Following the strength, is FAST a buy right now? Or is the market overestimating its value? Find out in our full research report, it’s free.

Why are we positive on Fastenal?

Founded in 1967, Fastenal (NASDAQ: FAST) provides industrial and construction supplies, including fasteners, tools, safety products, and many other product categories to businesses globally.

1. Elite gross margin powers best-in-class business model

Gross profit margin is a critical metric to track because it sheds light on its pricing power, complexity of products, and ability to procure raw materials, equipment, and labor.

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 45.3% gross margin over the last five years. That means Fastenal only paid its suppliers $54.66 for every $100 in revenue.

2. Operating margin reveals a well-run organization

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Fastenal’s operating margin has more or less stayed the same over the last 12 months , averaging 20.5% over the last five years. This profitability was elite for an industrials business thanks to its efficient cost structure and economies of scale. This is seen in its fast historical revenue growth and healthy gross margin, which is why we look at all three data points together.

3. Stellar ROIC showcases lucrative growth opportunities

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Fastenal’s five-year average ROIC was 32.3%, placing it among the best industrials companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.

Final judgment

These are just a few reasons why we’re bullish on Fastenal, and with its shares beating the market recently, the stock trades at 38× forward P/E (or $52.33 per share). Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.

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