Tuesday, October 13, 2015

Weekly Purchase 6 - FAST



For this week's Sharebuilder purchase, I added to my existing FAST position. As you know, I am taking the opportunity to load/rebalance up my smaller holdings in my dividend stock portfolio. In addition, FAST appeared in my recent October screen.


Details of Purchase


On Tuesday, I bought 25.9591 shares of Fastenal (FAST).


Action
Security
Price
Quantity
Amount
Buy
FAST
$38.37
25.9591
$996


This purchase increases my forward annual dividends by $29.07.

About Fastenal (FAST)


Fastenal sells industrial and construction supplies. It started business in 1967 selling threaded fasteners in small- to medium-size cities. Later, it changed its business plan to include some sites in large cities.


FAST has around 2,700 stores in the mostly in US with some international presence.  FAST distributes products to its store sites from 14 distribution centers, with 11 located throughout the U.S., two in Canada and one in Mexico.


Please read my previous analysis here:


I’ve updated my analysis table below:
FAST 10/2015
Area
Criteria
CheckList
Comment
Quality Company
Dividend Growth
>5 years
Yes
16 Years
ROE/Op Margin
Stable
Yes
Stable
Long term Avg Growth
Stable
Yes
Stable - Note
FCF over Dividends
Yes
Yes
FCF covers Dividends
M* Moat
Wide Moat
Yes
M* Wide
M* & S&P
Credit Rating
> BBB+
No Data
None - Interest Coverage covers Debt
Cash to Debt & Interest Coverage, Debt to Equity
Cash Debt >1 or Interest Coverage > 5
Yes
Cash to Debt 1.52
Interest Coverage 860.75
Debt to Equity 18.71
M* & S&P Stars
> 3 Stars for both
Yes
M* 4 Stars
S&P CapIQ 3 Stars
Payout Ratio
<60%
Yes
60%
Dividend Growth
& Yield
Dividend Yield
>3%
No
2.87%
Dividend Growth
>5%
Yes
23.00%
Chowder
>8% for Util/Tel
Yes
25.87%
Valuation
Yield/Avg Yield
>1.1
Yes
1.70
Dividend Yield Theory Mid Point
Below Mid Point
Yes
Mid Point 58.91
Low Point 34
P/E
Below Mid Point
Yes
Median 29.36 Current 18.3
DRRM
~10%
Yes
Assuming 7% growth; projected return=10.55%
M* Estimate
<M* est
Yes
M* 47
S&P Estimate
< S&P cap IQ est
Yes
S&P Cap IQ 46
Data from Gurufocus, Yahoo Finance, Google Finance, M*, S&P Capital


Fair Price Calculation


I use the dividend yield theory, PE analysis and DDRM for fair price calculation. Based on these methods, I estimate the fair price to be around 42. Therefore, I believe FAST is trading close to fair value - if not slightly under.

The market reacted negatively to FAST today even though earnings were met - Sales targets were missed. For the short term, the news can be considered negative - but for long term I think Fastenal's prospects are fine.


That's it for now! What do you think of Fastenal?
D4s

8 comments:

  1. Good purchase D4S!
    I don't see much growth (around 5%?) in the next two years according to analysts: http://www.4-traders.com/FASTENAL-COMPANY-4901/financials/

    But it's a really safe bet - it's on my watchlist too!

    And according to ycharts, it's 37,91% undervalued. I assume they are taking deviation from historical median/average to actual P/E. The dividend yield is in a similar range like back in 2009/2010.

    I think it's a great time to enter FAST!

    Cheers
    DivRider

    ReplyDelete
    Replies
    1. DivRider,
      Thanks for your comments. S&P cap IQ has a 6% eps growth so yes - I would say 5-7 range is reasonable. I think there will be further price weakness in the near future for FAST based on all the negative views. If I am a short term investor, I will stay away. Long term, I think it will slowly grow - like you said. I don't mind waiting based on the current yield and dividend growth rate.
      D4s

      Delete
  2. I think this is a good buy D4s. The dividend growth the past 10 years looks impressive and it certainly has pulled back nicely. There may be more to come but looks like a solid buy. I am adding it to my watchlist.

    -Adam

    ReplyDelete
    Replies
    1. Adam,
      Thanks. Definitely some price weaknesses for FAST. Change in CEOs is not a good thing. It's a good thing my outlook is 20 years and more.
      D4s

      Delete
  3. D4s,

    Nice buy here. I bought FAST last month after taking a really good look at the business model. I think the valuation here is very reasonable considering the quality, and especially relative to the historical valuation. Meanwhile, great fundamentals with no debt. Solid business. We should do well. :)

    Cheers!

    ReplyDelete
    Replies
    1. Jason,
      I am glad to be a fellow shareholder. I agree with you that it is an excellent company for the long term. Thanks for visiting!
      D4s

      Delete
  4. I think long-term is a good buy. I put FAST head to head to with GWW recently because I was considering GWW. FAST won on several accounts including estimated EPS growth, PEG and PEGY. It may not be a high yield, but it has a nice low payout ratio and the company appears solid.

    ReplyDelete
    Replies
    1. Chimp,
      Yes - I also looked at GWW vs FAST a while ago. I opted for FAST based on teh higher growth. GWW is still on my watchlist - and I will be happy to add given the right circumstances.
      Thanks for your support!
      D4s

      Delete