Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Fastenal Company (FAST), W.W. Grainger, Inc. (GWW): The Construction Business Is One of the Best Economic Recovery Plays

Page 1 of 2

With the U.S. economy showing signs of finally producing a sustainable recovery, there are opportunities to be found in some of the companies that produce items that will benefit the most from an improved economy. One area that should tremendously benefit from improving economic fundamentals is the construction industry. An improved economy means more new homes being built, more renovations of existing homes, more commercial construction projects, and more infrastructure projects, such as roads being rebuilt. One of my favorite ways to play this is with Fastenal Company (NASDAQ:FAST), one of the world’s leading manufacturers of fasteners for the construction industry.

Fastenal Company (NASDAQ:FAST)

About Fastenal

Fastenal Company (NASDAQ:FAST) has grown tremendously over its 45-year history and now operates over 2,600 stores in all 50 states and 16 countries around the world. The company’s main products are its line of almost 600,000 different types of threaded fasteners and related accessories.

In addition to fasteners, the company also sells tools and equipment, cutting tool blades, fluid transfer components, welding supply items, and safety equipment, just to name a few. Most of the products sold in the company’s stores are made by other companies. Fastenal’s supplier and customer bases are both extremely diverse, with no one supplier or customer accounting for a significant percentage of the company’s business.

Fastenal has expanded aggressively over the past decade, with revenues more than tripling during that time period:

Looks expensive, but don’t be fooled

At over 33 times last year’s earnings, Fastenal Company (NASDAQ:FAST) seems a bit expensive upon first glance. However, I feel that Fastenal’s growth potential and strong financial position completely justify its valuation. One of the company’s new growth strategies is to put vending machines at customer job sites with various fasteners and other supplies they may need. Since beginning this strategy, Fastenal has over 25,000 vending machines currently in operation, and plans to add another 30,000 this year.

Due to the combination of their new growth initiatives and the continued economic recovery, Fastenal is projected to grow its sales at a double-digit rate going forward. Combined with a renewed emphasis on cost controls which are expected to produce wider margins, Fastenal is expected to grow its profits at a very impressive pace. For 2013, Fastenal is projected to earn $1.59 per share, rising to $1.85 and $2.14 in 2014 and 2015, respectively. This translates to a three year average forward earnings growth rate of 14.7%. The combination of this with Fastenal’s excellent balance sheet with no long-term debt whatsoever leads me to think that shares are still very reasonably valued.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!