Fastenal (NASDAQ:FAST) stock performs better than its underlying earnings growth over last five years

When you buy a stock there is always a possibility that it could drop 100%. But on a lighter note, a good company can see its share price rise well over 100%. For instance, the price of Fastenal Company (NASDAQ:FAST) stock is up an impressive 152% over the last five years. In more good news, the share price has risen 8.1% in thirty days.

Since it's been a strong week for Fastenal shareholders, let's have a look at trend of the longer term fundamentals.

See our latest analysis for Fastenal

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, Fastenal achieved compound earnings per share (EPS) growth of 7.8% per year. This EPS growth is lower than the 20% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Fastenal's TSR for the last 5 years was 187%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Fastenal provided a TSR of 9.8% over the year (including dividends). That's fairly close to the broader market return. We should note here that the five-year TSR is more impressive, at 23% per year. Although the share price growth has slowed, the longer term story points to a business well worth watching. It's always interesting to track share price performance over the longer term. But to understand Fastenal better, we need to consider many other factors. For example, we've discovered 1 warning sign for Fastenal that you should be aware of before investing here.

Fastenal is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.