Here's Why We Think Fastenal (NASDAQ:FAST) Is Well Worth Watching

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Fastenal (NASDAQ:FAST). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Fastenal

How Quickly Is Fastenal Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, Fastenal has grown EPS by 11% per year. That's a pretty good rate, if the company can sustain it.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Fastenal maintained stable EBIT margins over the last year, all while growing revenue 16% to US$7.0b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Fastenal's future EPS 100% free.

Are Fastenal Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Despite US$409k worth of sales, Fastenal insiders have overwhelmingly been buying the stock, spending US$1.0m on purchases in the last twelve months. You could argue that level of buying implies genuine confidence in the business. We also note that it was the Executive Vice President of International Sales, Jeffery Watts, who made the biggest single acquisition, paying US$300k for shares at about US$50.58 each.

On top of the insider buying, it's good to see that Fastenal insiders have a valuable investment in the business. With a whopping US$57m worth of shares as a group, insiders have plenty riding on the company's success. This should keep them focused on creating long term value for shareholders.

While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because Fastenal's CEO, Dan Florness, is paid at a relatively modest level when compared to other CEOs for companies of this size. The median total compensation for CEOs of companies similar in size to Fastenal, with market caps over US$8.0b, is around US$12m.

Fastenal's CEO took home a total compensation package of US$5.4m in the year prior to December 2022. First impressions seem to indicate a compensation policy that is favourable to shareholders. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Does Fastenal Deserve A Spot On Your Watchlist?

As previously touched on, Fastenal is a growing business, which is encouraging. Better yet, insiders are significant shareholders, and have been buying more shares. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. We should say that we've discovered 1 warning sign for Fastenal that you should be aware of before investing here.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Fastenal, you'll probably love this free list of growing companies that insiders are buying.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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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.