Intrinsic value of Fastenal Company - FAST

Previous Close

$61.70

  Intrinsic Value

$45.10

stock screener

  Rating & Target

sell

-27%

Previous close

$61.70

 
Intrinsic value

$45.10

 
Up/down potential

-27%

 
Rating

sell

We calculate the intrinsic value of FAST stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 17.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  13.10
  12.29
  11.56
  10.90
  10.31
  9.78
  9.30
  8.87
  8.49
  8.14
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.22
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
  5.42
  5.38
Revenue, $m
  5,615
  6,306
  7,035
  7,802
  8,606
  9,448
  10,327
  11,244
  12,198
  13,191
  14,223
  15,296
  16,410
  17,569
  18,773
  20,024
  21,326
  22,681
  24,090
  25,558
  27,088
  28,683
  30,345
  32,081
  33,892
  35,784
  37,760
  39,826
  41,986
  44,245
Variable operating expenses, $m
  4,458
  4,994
  5,561
  6,157
  6,783
  7,437
  8,121
  8,833
  9,575
  10,347
  11,056
  11,890
  12,757
  13,657
  14,593
  15,566
  16,578
  17,631
  18,727
  19,868
  21,057
  22,297
  23,590
  24,938
  26,347
  27,817
  29,353
  30,959
  32,639
  34,395
Fixed operating expenses, $m
  15
  16
  16
  16
  17
  17
  17
  18
  18
  19
  19
  19
  20
  20
  21
  21
  22
  22
  23
  23
  24
  24
  25
  25
  26
  26
  27
  28
  28
  29
Total operating expenses, $m
  4,473
  5,010
  5,577
  6,173
  6,800
  7,454
  8,138
  8,851
  9,593
  10,366
  11,075
  11,909
  12,777
  13,677
  14,614
  15,587
  16,600
  17,653
  18,750
  19,891
  21,081
  22,321
  23,615
  24,963
  26,373
  27,843
  29,380
  30,987
  32,667
  34,424
Operating income, $m
  1,142
  1,296
  1,458
  1,628
  1,807
  1,994
  2,189
  2,393
  2,605
  2,826
  3,147
  3,386
  3,634
  3,891
  4,159
  4,437
  4,726
  5,027
  5,341
  5,667
  6,007
  6,361
  6,731
  7,117
  7,520
  7,940
  8,380
  8,839
  9,319
  9,822
EBITDA, $m
  1,391
  1,563
  1,745
  1,937
  2,138
  2,348
  2,568
  2,797
  3,036
  3,284
  3,542
  3,810
  4,089
  4,378
  4,679
  4,992
  5,317
  5,656
  6,009
  6,376
  6,758
  7,157
  7,572
  8,006
  8,459
  8,932
  9,427
  9,943
  10,483
  11,048
Interest expense (income), $m
  6
  27
  34
  42
  50
  58
  67
  77
  87
  97
  107
  118
  130
  142
  154
  167
  180
  194
  208
  223
  239
  255
  272
  290
  308
  328
  348
  369
  391
  414
  438
Earnings before tax, $m
  1,115
  1,261
  1,416
  1,578
  1,748
  1,926
  2,112
  2,306
  2,508
  2,718
  3,029
  3,256
  3,492
  3,737
  3,992
  4,257
  4,532
  4,819
  5,117
  5,428
  5,752
  6,089
  6,441
  6,808
  7,192
  7,592
  8,011
  8,448
  8,906
  9,384
Tax expense, $m
  301
  341
  382
  426
  472
  520
  570
  623
  677
  734
  818
  879
  943
  1,009
  1,078
  1,149
  1,224
  1,301
  1,382
  1,466
  1,553
  1,644
  1,739
  1,838
  1,942
  2,050
  2,163
  2,281
  2,404
  2,534
Net income, $m
  814
  921
  1,033
  1,152
  1,276
  1,406
  1,542
  1,684
  1,831
  1,984
  2,211
  2,377
  2,549
  2,728
  2,914
  3,107
  3,308
  3,518
  3,735
  3,962
  4,199
  4,445
  4,702
  4,970
  5,250
  5,542
  5,848
  6,167
  6,501
  6,850

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  3,756
  4,218
  4,705
  5,218
  5,757
  6,320
  6,908
  7,521
  8,159
  8,823
  9,514
  10,231
  10,977
  11,752
  12,557
  13,394
  14,265
  15,171
  16,114
  17,096
  18,119
  19,186
  20,298
  21,459
  22,670
  23,935
  25,258
  26,639
  28,084
  29,596
Adjusted assets (=assets-cash), $m
  3,756
  4,218
  4,705
  5,218
  5,757
  6,320
  6,908
  7,521
  8,159
  8,823
  9,514
  10,231
  10,977
  11,752
  12,557
  13,394
  14,265
  15,171
  16,114
  17,096
  18,119
  19,186
  20,298
  21,459
  22,670
  23,935
  25,258
  26,639
  28,084
  29,596
Revenue / Adjusted assets
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
  1.495
Average production assets, $m
  1,028
  1,154
  1,287
  1,428
  1,575
  1,729
  1,890
  2,058
  2,232
  2,414
  2,603
  2,799
  3,003
  3,215
  3,435
  3,664
  3,903
  4,151
  4,409
  4,677
  4,957
  5,249
  5,553
  5,871
  6,202
  6,548
  6,910
  7,288
  7,683
  8,097
Working capital, $m
  1,937
  2,175
  2,427
  2,692
  2,969
  3,260
  3,563
  3,879
  4,208
  4,551
  4,907
  5,277
  5,662
  6,061
  6,477
  6,908
  7,358
  7,825
  8,311
  8,818
  9,345
  9,895
  10,469
  11,068
  11,693
  12,345
  13,027
  13,740
  14,485
  15,265
Total debt, $m
  634
  776
  926
  1,083
  1,249
  1,421
  1,602
  1,790
  1,986
  2,190
  2,402
  2,622
  2,851
  3,089
  3,336
  3,593
  3,861
  4,139
  4,428
  4,730
  5,044
  5,371
  5,713
  6,069
  6,441
  6,829
  7,235
  7,659
  8,103
  8,567
Total liabilities, $m
  1,153
  1,295
  1,445
  1,602
  1,767
  1,940
  2,121
  2,309
  2,505
  2,709
  2,921
  3,141
  3,370
  3,608
  3,855
  4,112
  4,379
  4,657
  4,947
  5,248
  5,563
  5,890
  6,231
  6,588
  6,960
  7,348
  7,754
  8,178
  8,622
  9,086
Total equity, $m
  2,603
  2,923
  3,261
  3,616
  3,989
  4,380
  4,787
  5,212
  5,654
  6,115
  6,593
  7,090
  7,607
  8,144
  8,702
  9,282
  9,886
  10,513
  11,167
  11,847
  12,557
  13,296
  14,066
  14,871
  15,710
  16,587
  17,503
  18,461
  19,462
  20,510
Total liabilities and equity, $m
  3,756
  4,218
  4,706
  5,218
  5,756
  6,320
  6,908
  7,521
  8,159
  8,824
  9,514
  10,231
  10,977
  11,752
  12,557
  13,394
  14,265
  15,170
  16,114
  17,095
  18,120
  19,186
  20,297
  21,459
  22,670
  23,935
  25,257
  26,639
  28,084
  29,596
Debt-to-equity ratio
  0.240
  0.270
  0.280
  0.300
  0.310
  0.320
  0.330
  0.340
  0.350
  0.360
  0.360
  0.370
  0.370
  0.380
  0.380
  0.390
  0.390
  0.390
  0.400
  0.400
  0.400
  0.400
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.420
  0.420
Adjusted equity ratio
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693
  0.693

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  814
  921
  1,033
  1,152
  1,276
  1,406
  1,542
  1,684
  1,831
  1,984
  2,211
  2,377
  2,549
  2,728
  2,914
  3,107
  3,308
  3,518
  3,735
  3,962
  4,199
  4,445
  4,702
  4,970
  5,250
  5,542
  5,848
  6,167
  6,501
  6,850
Depreciation, amort., depletion, $m
  248
  267
  288
  309
  331
  354
  379
  404
  431
  458
  394
  424
  455
  487
  521
  555
  591
  629
  668
  709
  751
  795
  841
  890
  940
  992
  1,047
  1,104
  1,164
  1,227
Funds from operations, $m
  1,062
  1,188
  1,321
  1,461
  1,607
  1,761
  1,921
  2,088
  2,262
  2,443
  2,606
  2,801
  3,004
  3,215
  3,435
  3,663
  3,900
  4,147
  4,403
  4,671
  4,950
  5,240
  5,543
  5,860
  6,190
  6,535
  6,895
  7,271
  7,665
  8,077
Change in working capital, $m
  224
  238
  251
  265
  278
  290
  303
  316
  329
  342
  356
  370
  385
  400
  415
  432
  449
  467
  486
  506
  528
  550
  574
  599
  625
  653
  682
  713
  745
  780
Cash from operations, $m
  838
  950
  1,069
  1,196
  1,330
  1,470
  1,618
  1,772
  1,933
  2,100
  2,250
  2,431
  2,620
  2,816
  3,019
  3,231
  3,451
  3,679
  3,917
  4,164
  4,422
  4,690
  4,970
  5,261
  5,565
  5,882
  6,213
  6,559
  6,920
  7,298
Maintenance CAPEX, $m
  -138
  -156
  -175
  -195
  -216
  -239
  -262
  -286
  -312
  -338
  -366
  -394
  -424
  -455
  -487
  -521
  -555
  -591
  -629
  -668
  -709
  -751
  -795
  -841
  -890
  -940
  -992
  -1,047
  -1,104
  -1,164
New CAPEX, $m
  -118
  -126
  -133
  -140
  -147
  -154
  -161
  -168
  -175
  -182
  -189
  -196
  -204
  -212
  -220
  -229
  -238
  -248
  -258
  -269
  -280
  -292
  -304
  -318
  -331
  -346
  -362
  -378
  -395
  -413
Cash from investing activities, $m
  -256
  -282
  -308
  -335
  -363
  -393
  -423
  -454
  -487
  -520
  -555
  -590
  -628
  -667
  -707
  -750
  -793
  -839
  -887
  -937
  -989
  -1,043
  -1,099
  -1,159
  -1,221
  -1,286
  -1,354
  -1,425
  -1,499
  -1,577
Free cash flow, $m
  582
  668
  761
  861
  966
  1,078
  1,195
  1,318
  1,446
  1,580
  1,695
  1,840
  1,991
  2,149
  2,312
  2,481
  2,657
  2,840
  3,030
  3,228
  3,433
  3,647
  3,870
  4,102
  4,344
  4,596
  4,859
  5,134
  5,420
  5,720
Issuance/(repayment) of debt, $m
  134
  142
  150
  158
  165
  173
  181
  188
  196
  204
  212
  220
  229
  238
  247
  257
  267
  278
  289
  301
  314
  327
  341
  356
  372
  388
  406
  424
  444
  464
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  134
  142
  150
  158
  165
  173
  181
  188
  196
  204
  212
  220
  229
  238
  247
  257
  267
  278
  289
  301
  314
  327
  341
  356
  372
  388
  406
  424
  444
  464
Total cash flow (excl. dividends), $m
  716
  810
  911
  1,018
  1,131
  1,251
  1,375
  1,506
  1,642
  1,784
  1,907
  2,061
  2,220
  2,386
  2,559
  2,738
  2,925
  3,118
  3,320
  3,529
  3,748
  3,975
  4,212
  4,458
  4,716
  4,984
  5,265
  5,558
  5,864
  6,184
Retained Cash Flow (-), $m
  -300
  -320
  -338
  -356
  -373
  -390
  -408
  -425
  -442
  -460
  -478
  -497
  -517
  -537
  -558
  -580
  -603
  -628
  -653
  -681
  -709
  -739
  -771
  -804
  -840
  -877
  -916
  -958
  -1,001
  -1,047
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  416
  490
  573
  663
  758
  860
  968
  1,081
  1,200
  1,324
  1,428
  1,563
  1,704
  1,849
  2,001
  2,158
  2,321
  2,490
  2,666
  2,849
  3,038
  3,236
  3,441
  3,654
  3,876
  4,108
  4,349
  4,600
  4,863
  5,137
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  399
  448
  499
  546
  588
  624
  654
  676
  689
  694
  678
  667
  648
  621
  587
  548
  505
  459
  411
  362
  314
  268
  226
  186
  151
  120
  93
  71
  53
  39
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Fastenal Company is engaged in wholesale distribution of industrial and construction supplies. The Company is engaged in fastener distribution, and non-fastener maintenance and supply business. As of December 31, 2016, it distributed these supplies through a network of approximately 2,500 stores. Its customers are in the manufacturing and non-residential construction markets. The manufacturing market includes both original equipment manufacturers (OEM) and maintenance, repair, and operations (MRO). The non-residential construction market includes general, electrical, plumbing, sheet metal and road contractors. Other users of its products include farmers, truckers, railroads, oil exploration, production and refinement companies, mining companies, federal, state, and local governmental entities, schools and certain retail trades. Its original product offerings are fasteners and other industrial and construction supplies, many of which are sold under the Fastenal product name.

FINANCIAL RATIOS  of  Fastenal Company (FAST)

Valuation Ratios
P/E Ratio 35.8
Price to Sales 4.5
Price to Book 9.2
Price to Tangible Book
Price to Cash Flow 34.7
Price to Free Cash Flow 54.9
Growth Rates
Sales Growth Rate 2.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 21.9%
Cap. Spend. - 3 Yr. Gr. Rate -1.8%
Financial Strength
Quick Ratio 11
Current Ratio 0.4
LT Debt to Equity 19.7%
Total Debt to Equity 20.2%
Interest Coverage 133
Management Effectiveness
Return On Assets 19.3%
Ret/ On Assets - 3 Yr. Avg. 20.9%
Return On Total Capital 22.2%
Ret/ On T. Cap. - 3 Yr. Avg. 24.4%
Return On Equity 26.7%
Return On Equity - 3 Yr. Avg. 27.1%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 49.6%
Gross Margin - 3 Yr. Avg. 50.3%
EBITDA Margin 22.7%
EBITDA Margin - 3 Yr. Avg. 23.2%
Operating Margin 20.1%
Oper. Margin - 3 Yr. Avg. 20.9%
Pre-Tax Margin 19.9%
Pre-Tax Margin - 3 Yr. Avg. 20.8%
Net Profit Margin 12.6%
Net Profit Margin - 3 Yr. Avg. 13.1%
Effective Tax Rate 36.8%
Eff/ Tax Rate - 3 Yr. Avg. 37.2%
Payout Ratio 69.5%

FAST stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FAST stock intrinsic value calculation we used $4965 million for the last fiscal year's total revenue generated by Fastenal Company. The default revenue input number comes from 0001 income statement of Fastenal Company. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our FAST stock valuation model: a) initial revenue growth rate of 13.1% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for FAST is calculated based on our internal credit rating of Fastenal Company, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Fastenal Company.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of FAST stock the variable cost ratio is equal to 79.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $15 million in the base year in the intrinsic value calculation for FAST stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Fastenal Company.

Corporate tax rate of 27% is the nominal tax rate for Fastenal Company. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the FAST stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for FAST are equal to 18.3%.

Life of production assets of 6.6 years is the average useful life of capital assets used in Fastenal Company operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for FAST is equal to 34.5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $2302.7 million for Fastenal Company - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 286.127 million for Fastenal Company is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Fastenal Company at the current share price and the inputted number of shares is $17.7 billion.

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