Friday, February 12, 2021

Fastenal Seeing The Start Of A Rebound, And Bullish On Margins

While the recovery isn’t robust, and it’s not happening evenly across end-markets, there is ample evidence from recent reports, including Fastenal’s (NASDAQ:FAST) fourth quarter results and ongoing monthly sales numbers, that manufacturing end-markets are turning around. Guidance across the sector has been cautious, and I’m not looking for Fastenal’s growth to accelerate into the high single-digits in 2021, but fastener demand should improve throughout the year and help offset the headwinds that will come whenever the pandemic fades and drives lower demand for janitorial/safety equipment.

Of course, Fastenal’s valuation remains an issue. The shares typically trade above what would otherwise seem fair or normal, even allowing for Fastenal’s superior margin and ROIC profile. About the best that I can say is that the valuation isn’t so stretched on a relative basis (Fastenal’s forward PE and/or EV/EBITDA relative to the manufacturing/industrial sector), but I find relative valuation more useful for trading as opposed to longer-term investing.

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Fastenal Seeing The Start Of A Rebound, And Bullish On Margins

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