We Think Fastenal (NASDAQ:FAST) Can Stay On Top Of Its Debt

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We can see that Fastenal Company (NASDAQ:FAST) does use debt in its business. But should shareholders be worried about its use of debt?

We've discovered 1 warning sign about Fastenal. View them for free.

Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Fastenal's Net Debt?

The chart below, which you can click on for greater detail, shows that Fastenal had US$200.0m in debt in March 2025; about the same as the year before. But on the other hand it also has US$231.8m in cash, leading to a US$31.8m net cash position.

How Healthy Is Fastenal's Balance Sheet?

We can see from the most recent balance sheet that Fastenal had liabilities of US$785.2m falling due within a year, and liabilities of US$395.4m due beyond that. Offsetting this, it had US$231.8m in cash and US$1.28b in receivables that were due within 12 months. So it can boast US$329.9m more liquid assets than total liabilities.

Having regard to Fastenal's size, it seems that its liquid assets are well balanced with its total liabilities. So it's very unlikely that the US$45.5b company is short on cash, but still worth keeping an eye on the balance sheet. Simply put, the fact that Fastenal has more cash than debt is arguably a good indication that it can manage its debt safely.

See our latest analysis for Fastenal

While Fastenal doesn't seem to have gained much on the EBIT line, at least earnings remain stable for now. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Fastenal can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. Fastenal may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Over the most recent three years, Fastenal recorded free cash flow worth 66% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This cold hard cash means it can reduce its debt when it wants to.

Summing Up

While it is always sensible to investigate a company's debt, in this case Fastenal has US$31.8m in net cash and a decent-looking balance sheet. So we don't think Fastenal's use of debt is risky. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. We've identified 1 warning sign with Fastenal , and understanding them should be part of your investment process.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.