Was Fastenal Company’s (NASDAQ:FAST) Earnings Growth Better Than The Industry’s?

Measuring Fastenal Company’s (NasdaqGS:FAST) track record of past performance is an insightful exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess FAST’s recent performance announced on 31 December 2019 and compare these figures to its historical trend and industry movements.

See our latest analysis for Fastenal

Could FAST beat the long-term trend and outperform its industry?

FAST’s trailing twelve-month earnings (from 31 December 2019) of US$791m has increased by 5.2% compared to the previous year.

However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 11%, indicating the rate at which FAST is growing has slowed down. What could be happening here? Well, let’s take a look at what’s going on with margins and if the rest of the industry is feeling the heat.

NasdaqGS:FAST Income Statement, March 14th 2020
NasdaqGS:FAST Income Statement, March 14th 2020

In terms of returns from investment, Fastenal has invested its equity funds well leading to a 30% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 21% exceeds the US Trade Distributors industry of 6.7%, indicating Fastenal has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Fastenal’s debt level, has declined over the past 3 years from 33% to 32%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 4.7% to 13% over the past 5 years.

What does this mean?

Fastenal’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While Fastenal has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. You should continue to research Fastenal to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for FAST’s future growth? Take a look at our free research report of analyst consensus for FAST’s outlook.
  2. Financial Health: Are FAST’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2019. This may not be consistent with full year annual report figures.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.