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Is it a Good Time to Add Fastenal to Your Portfolio Now?
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Shares of Fastenal Company (FAST - Free Report) have rallied 28.3% in the last six months, outperforming the 21.8% gain of its industry and 11% increase of the S&P 500 companies.
The company’s Zacks Rank #2 (Buy) and VGM Score of B also indicate that it is a compelling investment proposition at the moment. This is because our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best investment opportunities for investors.
Further, earnings estimates have risen over the past few weeks, suggesting that sentiments on Fastenal are moving in the right direction. Over the last 30 days, the Zacks Consensus Estimate for 2018 earnings inched up 0.5% reflecting bullish analyst sentiments.
Let us delve deeper into the other factors that make this stock a lucrative pick.
Growth Prospects Solid
Increased installation of vending machines and onsite locations along with the Mansco acquisition are expected to boost sales.
In fact, Fastenal’s industrial vending process has been a key growth driver. Sales through vending machines continued to grow at or near a double-digit pace in each of the first three quarters of 2017. In the first nine months of 2017, the company signed 15,089 vending machines reflecting an increase of 5.5% from the year-ago period.
Apart from vending machines, increased onsite locations have contributed significantly to sales. Notably, Fastenal provides onsite location in which a mini-Fastenal shop is basically located in a customer’s plant. The company signed 213 new onsite locations in the first nine months of 2017 and had 555 active sites as on Sep 30, 2017, indicating a year-over-year increase of 47.6%.
In 2017, Fastenal intends to achieve 275-300 onsite signings compared with 176 in 2016 and 80 in 2015. Increased number of onsite locations is likely to boost Fastenal’s market share.
Again, the acquisition of Mansco establishes Fastenal’s presence in a market where it has not meaningfully contributed in the past. In the third quarter of 2017, Mansco contributed 130 basis points to total sales growth of 11.8% and is expected to contribute further.
Moreover, the Zacks Consensus Estimate for sales is expected to increase 10.7% in 2017 more than the industry’s projected growth rate of 7.7%. Additionally, sales in 2018 are expected to increase 9.1%.
High Return on Equity
Fastenal’s trailing 12-month return on equity (ROE) supports its growth potential. Its ROE in the trailing 12 months is 27.3%, way more than its industry’s average of 14.3%. This reflects the company’s efficient usage of shareholders’ funds.
Industry Outlook Positive
The Zacks Building Products – Retail Industry rallied 34% year to date, outperforming the S&P 500’s gain of 20%. Also, a solid industry rank (among the top 28% out of 265 industries) signals that the companies in this space are likely to benefit from favorable broader factors in the immediate future.
Beacon Roofing is likely to witness 41.3% earnings growth in fiscal 2018.
Tecnoglass is expected to see 30.2% growth in 2018 earnings.
Restaurant Brands is expected to see 36.2% growth in 2018 earnings.
Zacks Editor-in-Chief Goes "All In" on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.
Image: Bigstock
Is it a Good Time to Add Fastenal to Your Portfolio Now?
Shares of Fastenal Company (FAST - Free Report) have rallied 28.3% in the last six months, outperforming the 21.8% gain of its industry and 11% increase of the S&P 500 companies.
The company’s Zacks Rank #2 (Buy) and VGM Score of B also indicate that it is a compelling investment proposition at the moment. This is because our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best investment opportunities for investors.
Further, earnings estimates have risen over the past few weeks, suggesting that sentiments on Fastenal are moving in the right direction. Over the last 30 days, the Zacks Consensus Estimate for 2018 earnings inched up 0.5% reflecting bullish analyst sentiments.
Let us delve deeper into the other factors that make this stock a lucrative pick.
Growth Prospects Solid
Increased installation of vending machines and onsite locations along with the Mansco acquisition are expected to boost sales.
In fact, Fastenal’s industrial vending process has been a key growth driver. Sales through vending machines continued to grow at or near a double-digit pace in each of the first three quarters of 2017. In the first nine months of 2017, the company signed 15,089 vending machines reflecting an increase of 5.5% from the year-ago period.
Apart from vending machines, increased onsite locations have contributed significantly to sales. Notably, Fastenal provides onsite location in which a mini-Fastenal shop is basically located in a customer’s plant. The company signed 213 new onsite locations in the first nine months of 2017 and had 555 active sites as on Sep 30, 2017, indicating a year-over-year increase of 47.6%.
In 2017, Fastenal intends to achieve 275-300 onsite signings compared with 176 in 2016 and 80 in 2015. Increased number of onsite locations is likely to boost Fastenal’s market share.
Again, the acquisition of Mansco establishes Fastenal’s presence in a market where it has not meaningfully contributed in the past. In the third quarter of 2017, Mansco contributed 130 basis points to total sales growth of 11.8% and is expected to contribute further.
Moreover, the Zacks Consensus Estimate for sales is expected to increase 10.7% in 2017 more than the industry’s projected growth rate of 7.7%. Additionally, sales in 2018 are expected to increase 9.1%.
High Return on Equity
Fastenal’s trailing 12-month return on equity (ROE) supports its growth potential. Its ROE in the trailing 12 months is 27.3%, way more than its industry’s average of 14.3%. This reflects the company’s efficient usage of shareholders’ funds.
Industry Outlook Positive
The Zacks Building Products – Retail Industry rallied 34% year to date, outperforming the S&P 500’s gain of 20%. Also, a solid industry rank (among the top 28% out of 265 industries) signals that the companies in this space are likely to benefit from favorable broader factors in the immediate future.
Other Key Picks
A few better-ranked stocks in the Zacks Retail-Wholesale sector are Beacon Roofing Supply, Inc. (BECN - Free Report) , Tecnoglass Inc. (TGLS - Free Report) and Restaurant Brands International Inc. (QSR - Free Report) .
While Beacon Roofing sports a Zacks Rank #1, the other companies carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Beacon Roofing is likely to witness 41.3% earnings growth in fiscal 2018.
Tecnoglass is expected to see 30.2% growth in 2018 earnings.
Restaurant Brands is expected to see 36.2% growth in 2018 earnings.
Zacks Editor-in-Chief Goes "All In" on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.
Download it free >>