Fastenal Company (NASDAQ:FAST): Immense Growth Potential?

As Fastenal Company (NASDAQ:FAST) announced its earnings release on 31 December 2018, it seems that analyst expectations are fairly bearish, as a 7.5% rise in profits is expected in the upcoming year, compared with the higher past 5-year average growth rate of 8.6%. With trailing-twelve-month net income at current levels of US$752m, we should see this rise to US$809m in 2020. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Fastenal in the longer term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

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Exciting times ahead?

Longer term expectations from the 17 analysts covering FAST’s stock is one of positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of FAST’s earnings growth over these next few years.

NASDAQGS:FAST Future Profit January 31st 19
NASDAQGS:FAST Future Profit January 31st 19

This results in an annual growth rate of 6.5% based on the most recent earnings level of US$752m to the final forecast of US$923m by 2022. This leads to an EPS of $3.26 in the final year of projections relative to the current EPS of $2.62. As revenues is expected to outpace earnings, analysts expect margins to contract from the current 15% to 15% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Fastenal, there are three pertinent aspects you should look at:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is Fastenal worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Fastenal is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Fastenal? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.