This document provides an overview and analysis of Fastenal, an industrial goods distributor. It includes an investment thesis that Fastenal is undervalued given initiatives that could drive operating margin expansion despite analyst pessimism over macro factors. The document outlines Fastenal's business model, strategy of focusing on onsite locations and national accounts, and financial projections showing revenue growth driven by these initiatives. Key risks discussed are a potential manufacturing downturn and loss of suppliers.
William Blair Investment Banking Case Competition Jake White
Performed comprehensive strategic analysis for a fictitious educational services provider to identify and evaluate potential exit opportunities that would position the company for strong future expansion. Constructed public comparables, precedent transactions, discounted cash flow and leveraged buyout analyses to form a valuation range.
Cleveland Research Company Stock Pitch Competition Finalist PresentationNick Meyerson
Finished in the top 5 teams, presented this slideshow to a panel of equity research analysts and associates, and fielded questions about Mobileye's capital structure, its share price's sensitivity to excitement in the media, and projections including a DCF analysis, comparables analysis, and multiple sensitivity analyses.
Was one of five teams to present in front of a panel of equity research analysts and associates. Pitched Mobileye (MBLY) stock as a buy with a 12 month price target of $70.00 with a 67% upside from its current share price. As of 9/9/2016, MBLY is up 31% since our pitch.
William Blair Investment Banking Case Competition Jake White
Performed comprehensive strategic analysis for a fictitious educational services provider to identify and evaluate potential exit opportunities that would position the company for strong future expansion. Constructed public comparables, precedent transactions, discounted cash flow and leveraged buyout analyses to form a valuation range.
Cleveland Research Company Stock Pitch Competition Finalist PresentationNick Meyerson
Finished in the top 5 teams, presented this slideshow to a panel of equity research analysts and associates, and fielded questions about Mobileye's capital structure, its share price's sensitivity to excitement in the media, and projections including a DCF analysis, comparables analysis, and multiple sensitivity analyses.
Was one of five teams to present in front of a panel of equity research analysts and associates. Pitched Mobileye (MBLY) stock as a buy with a 12 month price target of $70.00 with a 67% upside from its current share price. As of 9/9/2016, MBLY is up 31% since our pitch.
Placed 1st out of 20 teams advising board members of a medical technology company on various strategic alternatives and maximizing shareholder value by utilizing discounted cash flow (DCF), precedent transactions, and comparable companies in a pitchbook presentation
15th Annual William Blair Investment Banking Case CompetitionRobertNahigian
Our team served as sell side advisors by. deriving the intrinsic value of fictitious company using four valuation methods to create a cohesive slide deck that defined the firm’s market position.
We further examined the industrial filtration industry and proposed multiple potential strategic acquirers and financial sponsors.
This is a stock pitch for BlackBerry that was presented to faculty and investment professionals for the Cleveland Research Company Stock Pitch Competition in April 2017. My team's pitch was selected as one of the four finalist groups.
L.E.K. Consulting recently surveyed more than 200 U.S. brand managers and packaging stakeholders at consumer packaged goods companies to understand their packaging needs and views on trends driving demand.
The survey focused on topics that include:
- Brand trends and their effect on packaging demand
- Shifts within packaging (e.g., new materials, packaging innovations)
- Perspectives on packaging demand (including forecast spend on packaging for their brands)
This Executive Insights analyzes key findings from this proprietary research
Conducted numerous valuation methodologies and thorough research for Steinkeller Solutions, a highly specialized staffing firm focused on Life Sciences, Technologies, Healthcare IT, and Energy. Assessed Bloomberg data, company financials, and company strategy to make an informed strategic sale recommendation to a sponsor to William Blair bankers.
A.T. Kearney reached out to more than 2,000 executives, business leaders, and heads of strategy functions to discuss their thoughts on the state of strategy today. Our findings indicate that while most leaders continue to believe in strategy, the return on their strategy initiatives has largely eroded over the past decade. In fact, when asked what it takes to secure a prosperous future, more than 80 percent of executives consider agility as important or more important than strategy when it comes to securing a prosperous future. Fortunately, the findings also point to promising ways to reclaim strategy—including using future-focused tools and techniques and engaging the organization in strategy formulation.
Digital Europe: Pushing the frontier, capturing the benefitsMcKinsey & Company
What is the speed at which digital is and will change our world?
How is Europe performing in digital compared to the United States? Where is the progress? And where is the paralysis?
What some of the challenges and risks of digital – its potential to divide business and society – between the highly digitized: the “have-mores,” and the “haves:” those who are not able or willing to adapt fast enough.
And what is our share our vision with you for how Europe needs to capture the huge digital prize. What can start-ups, companies, public authorities – everyone in this room – do, to make it happen?
Lifting the Barriers to Retail Innovation in ASEAN | A.T. KearneyKearney
Rising incomes and growing demand for consumer goods and services in ASEAN create rich opportunities for retailers in the region, which is especially significant as member nations join forces to become an economic powerhouse. Yet ASEAN retailers have been slow in terms of Innovation and as this market opens up, stepping up innovation is required to capitalize fully on the opportunities.
Placed 1st out of 20 teams advising board members of a medical technology company on various strategic alternatives and maximizing shareholder value by utilizing discounted cash flow (DCF), precedent transactions, and comparable companies in a pitchbook presentation
15th Annual William Blair Investment Banking Case CompetitionRobertNahigian
Our team served as sell side advisors by. deriving the intrinsic value of fictitious company using four valuation methods to create a cohesive slide deck that defined the firm’s market position.
We further examined the industrial filtration industry and proposed multiple potential strategic acquirers and financial sponsors.
This is a stock pitch for BlackBerry that was presented to faculty and investment professionals for the Cleveland Research Company Stock Pitch Competition in April 2017. My team's pitch was selected as one of the four finalist groups.
L.E.K. Consulting recently surveyed more than 200 U.S. brand managers and packaging stakeholders at consumer packaged goods companies to understand their packaging needs and views on trends driving demand.
The survey focused on topics that include:
- Brand trends and their effect on packaging demand
- Shifts within packaging (e.g., new materials, packaging innovations)
- Perspectives on packaging demand (including forecast spend on packaging for their brands)
This Executive Insights analyzes key findings from this proprietary research
Conducted numerous valuation methodologies and thorough research for Steinkeller Solutions, a highly specialized staffing firm focused on Life Sciences, Technologies, Healthcare IT, and Energy. Assessed Bloomberg data, company financials, and company strategy to make an informed strategic sale recommendation to a sponsor to William Blair bankers.
A.T. Kearney reached out to more than 2,000 executives, business leaders, and heads of strategy functions to discuss their thoughts on the state of strategy today. Our findings indicate that while most leaders continue to believe in strategy, the return on their strategy initiatives has largely eroded over the past decade. In fact, when asked what it takes to secure a prosperous future, more than 80 percent of executives consider agility as important or more important than strategy when it comes to securing a prosperous future. Fortunately, the findings also point to promising ways to reclaim strategy—including using future-focused tools and techniques and engaging the organization in strategy formulation.
Digital Europe: Pushing the frontier, capturing the benefitsMcKinsey & Company
What is the speed at which digital is and will change our world?
How is Europe performing in digital compared to the United States? Where is the progress? And where is the paralysis?
What some of the challenges and risks of digital – its potential to divide business and society – between the highly digitized: the “have-mores,” and the “haves:” those who are not able or willing to adapt fast enough.
And what is our share our vision with you for how Europe needs to capture the huge digital prize. What can start-ups, companies, public authorities – everyone in this room – do, to make it happen?
Lifting the Barriers to Retail Innovation in ASEAN | A.T. KearneyKearney
Rising incomes and growing demand for consumer goods and services in ASEAN create rich opportunities for retailers in the region, which is especially significant as member nations join forces to become an economic powerhouse. Yet ASEAN retailers have been slow in terms of Innovation and as this market opens up, stepping up innovation is required to capitalize fully on the opportunities.
Synthium Health is a B2B marketplace designed specifically for the healthcare industry. It offers a cloud-based supply-chain management solution that streamlines transactions between healthcare parties, driving engagement and conversion.
Madison Park Group is a unique investment banking firm that takes a "strategy first" approach to advising software companies. Our partners have developed and advised numerous successful companies as operators, investors and investment bankers.
This document brings together a set
of latest data points and publicly
available information relevant for
Platforms & Applications Industry.
We are very excited to share this
content and believe that readers will
benefit from this periodic publication
immensely.
RMD24 | Retail media: hoe zet je dit in als je geen AH of Unilever bent? Heid...BBPMedia1
Grote partijen zijn al een tijdje onderweg met retail media. Ondertussen worden in dit domein ook de kansen zichtbaar voor andere spelers in de markt. Maar met die kansen ontstaan ook vragen: Zelf retail media worden of erop adverteren? In welke fase van de funnel past het en hoe integreer je het in een mediaplan? Wat is nu precies het verschil met marketplaces en Programmatic ads? In dit half uur beslechten we de dilemma's en krijg je antwoorden op wanneer het voor jou tijd is om de volgende stap te zetten.
Business Valuation Principles for EntrepreneursBen Wann
This insightful presentation is designed to equip entrepreneurs with the essential knowledge and tools needed to accurately value their businesses. Understanding business valuation is crucial for making informed decisions, whether you're seeking investment, planning to sell, or simply want to gauge your company's worth.
[Note: This is a partial preview. To download this presentation, visit:
https://www.oeconsulting.com.sg/training-presentations]
Sustainability has become an increasingly critical topic as the world recognizes the need to protect our planet and its resources for future generations. Sustainability means meeting our current needs without compromising the ability of future generations to meet theirs. It involves long-term planning and consideration of the consequences of our actions. The goal is to create strategies that ensure the long-term viability of People, Planet, and Profit.
Leading companies such as Nike, Toyota, and Siemens are prioritizing sustainable innovation in their business models, setting an example for others to follow. In this Sustainability training presentation, you will learn key concepts, principles, and practices of sustainability applicable across industries. This training aims to create awareness and educate employees, senior executives, consultants, and other key stakeholders, including investors, policymakers, and supply chain partners, on the importance and implementation of sustainability.
LEARNING OBJECTIVES
1. Develop a comprehensive understanding of the fundamental principles and concepts that form the foundation of sustainability within corporate environments.
2. Explore the sustainability implementation model, focusing on effective measures and reporting strategies to track and communicate sustainability efforts.
3. Identify and define best practices and critical success factors essential for achieving sustainability goals within organizations.
CONTENTS
1. Introduction and Key Concepts of Sustainability
2. Principles and Practices of Sustainability
3. Measures and Reporting in Sustainability
4. Sustainability Implementation & Best Practices
To download the complete presentation, visit: https://www.oeconsulting.com.sg/training-presentations
Remote sensing and monitoring are changing the mining industry for the better. These are providing innovative solutions to long-standing challenges. Those related to exploration, extraction, and overall environmental management by mining technology companies Odisha. These technologies make use of satellite imaging, aerial photography and sensors to collect data that might be inaccessible or from hazardous locations. With the use of this technology, mining operations are becoming increasingly efficient. Let us gain more insight into the key aspects associated with remote sensing and monitoring when it comes to mining.
As a business owner in Delaware, staying on top of your tax obligations is paramount, especially with the annual deadline for Delaware Franchise Tax looming on March 1. One such obligation is the annual Delaware Franchise Tax, which serves as a crucial requirement for maintaining your company’s legal standing within the state. While the prospect of handling tax matters may seem daunting, rest assured that the process can be straightforward with the right guidance. In this comprehensive guide, we’ll walk you through the steps of filing your Delaware Franchise Tax and provide insights to help you navigate the process effectively.
Enterprise Excellence is Inclusive Excellence.pdfKaiNexus
Enterprise excellence and inclusive excellence are closely linked, and real-world challenges have shown that both are essential to the success of any organization. To achieve enterprise excellence, organizations must focus on improving their operations and processes while creating an inclusive environment that engages everyone. In this interactive session, the facilitator will highlight commonly established business practices and how they limit our ability to engage everyone every day. More importantly, though, participants will likely gain increased awareness of what we can do differently to maximize enterprise excellence through deliberate inclusion.
What is Enterprise Excellence?
Enterprise Excellence is a holistic approach that's aimed at achieving world-class performance across all aspects of the organization.
What might I learn?
A way to engage all in creating Inclusive Excellence. Lessons from the US military and their parallels to the story of Harry Potter. How belt systems and CI teams can destroy inclusive practices. How leadership language invites people to the party. There are three things leaders can do to engage everyone every day: maximizing psychological safety to create environments where folks learn, contribute, and challenge the status quo.
Who might benefit? Anyone and everyone leading folks from the shop floor to top floor.
Dr. William Harvey is a seasoned Operations Leader with extensive experience in chemical processing, manufacturing, and operations management. At Michelman, he currently oversees multiple sites, leading teams in strategic planning and coaching/practicing continuous improvement. William is set to start his eighth year of teaching at the University of Cincinnati where he teaches marketing, finance, and management. William holds various certifications in change management, quality, leadership, operational excellence, team building, and DiSC, among others.
Cracking the Workplace Discipline Code Main.pptxWorkforce Group
Cultivating and maintaining discipline within teams is a critical differentiator for successful organisations.
Forward-thinking leaders and business managers understand the impact that discipline has on organisational success. A disciplined workforce operates with clarity, focus, and a shared understanding of expectations, ultimately driving better results, optimising productivity, and facilitating seamless collaboration.
Although discipline is not a one-size-fits-all approach, it can help create a work environment that encourages personal growth and accountability rather than solely relying on punitive measures.
In this deck, you will learn the significance of workplace discipline for organisational success. You’ll also learn
• Four (4) workplace discipline methods you should consider
• The best and most practical approach to implementing workplace discipline.
• Three (3) key tips to maintain a disciplined workplace.
What is the TDS Return Filing Due Date for FY 2024-25.pdfseoforlegalpillers
It is crucial for the taxpayers to understand about the TDS Return Filing Due Date, so that they can fulfill your TDS obligations efficiently. Taxpayers can avoid penalties by sticking to the deadlines and by accurate filing of TDS. Timely filing of TDS will make sure about the availability of tax credits. You can also seek the professional guidance of experts like Legal Pillers for timely filing of the TDS Return.
The world of search engine optimization (SEO) is buzzing with discussions after Google confirmed that around 2,500 leaked internal documents related to its Search feature are indeed authentic. The revelation has sparked significant concerns within the SEO community. The leaked documents were initially reported by SEO experts Rand Fishkin and Mike King, igniting widespread analysis and discourse. For More Info:- https://news.arihantwebtech.com/search-disrupted-googles-leaked-documents-rock-the-seo-world/
India Orthopedic Devices Market: Unlocking Growth Secrets, Trends and Develop...Kumar Satyam
According to TechSci Research report, “India Orthopedic Devices Market -Industry Size, Share, Trends, Competition Forecast & Opportunities, 2030”, the India Orthopedic Devices Market stood at USD 1,280.54 Million in 2024 and is anticipated to grow with a CAGR of 7.84% in the forecast period, 2026-2030F. The India Orthopedic Devices Market is being driven by several factors. The most prominent ones include an increase in the elderly population, who are more prone to orthopedic conditions such as osteoporosis and arthritis. Moreover, the rise in sports injuries and road accidents are also contributing to the demand for orthopedic devices. Advances in technology and the introduction of innovative implants and prosthetics have further propelled the market growth. Additionally, government initiatives aimed at improving healthcare infrastructure and the increasing prevalence of lifestyle diseases have led to an upward trend in orthopedic surgeries, thereby fueling the market demand for these devices.
2. I Investment Thesis
II Company Overview
III Industry Dynamics
IV Catalysts
V Valuation
VI Channel Research & Risks
VII Appendix
Table of Contents
2
3. Meet the Analysts
Oscar Arenas
jacqueoi@miamioh.edu
Class of 2025
Adventis FMC & FINRA SIE Certified
Sydney Onest
onestsm@miamioh.edu
Class of 2025
Adventis FMC & Bloomberg Certified
3
5. Source: Company Filings, Team Projections
Note: Figures in $MM USD
Investment Thesis
5
FY22
Financials
Key
Catalysts
Bull
Bear
Buy
Target Price Upside
Recommendation
Investment Thesis
$60 17%
Fastenal’s market dominance in the highly
fragmented industrial distribution market
enables scale-driven cost advantages that
drive bargaining power with suppliers. It
captures customers through its high-touch
business model and supply chain solutions
that other industrial distributors and online
players like Amazon Business don’t offer.
Wide Economic Moat
Projected EPS
Fastenal is a quality asset trading at a reasonable price, with room for further multiple expansion
Fastenal is in the early innings of innovating a historically steady industry which
will improve bull market operating margins by 200 bps to 22%. The Street currently
weighs a manufacturing recession and gross margin pressures but fails to account
for the potential high market penetration from reshoring tailwinds and operating
margin expansion from the shift to onsite locations and national accounts.
We believe that management’s current initiatives will result in improved pricing, mix
shift, productivity, and allow it to outgrow competitors in market share.
24.8%
22.5%
27.6% 27.6%
2020 2021 2022 2023
ROIC EVA Spread
$6,981
$3,216
$1,454
$1,087
$230
$1,253
$802
Revenue
Gross Profit
Operating Income
Net Income
Cash
Net PP&E
Total Debt
Reshoring and infrastructure tailwinds
Supply chain relief and bullwhip effect
Recession resilience
▪ TAM growth and extra market share capture
from reshoring and infrastructure spending
▪ Onsite signings and average sales growth
▪ Operating margin expansion
▪ Manufacturing sector remains strong
▪ Demand fades from cyclical downturn in
manufacturing end markets
▪ Lower onsite signings and sales growth
▪ Unfavorable mix eroding operating margin
▪ Loss of key suppliers
Base Case Projections
Analyst Consensus
Bear Case
Fastenal will beat consensus EPS over the
medium term as The Street becomes
increasingly negative. Recent EPS
downgrades reflect pessimism around the
macro slowdown and unfavorable mix but
overlook strength from operating leverage
and strong performance during downturns.
$1.30
$1.80
$2.30
$2.80
$3.30
$3.80
2020 2021 2022 2023 2024 2025 2026 2027
7. With >96% of FY22 sales being from
North America, Fastenal is able to
capitalize on the reshoring trend and
capture additional market share
Fastenal Overview FY22 Product Revenue Breakdown
Global Presence
Fastenal: Overview
Fastenal is an industrial goods distributor and pioneer in value-add digital solutions
7
Source: Bloomberg, Company Filings
Overview
Strategy
Integration
▪ Implemented in 2019
as successor to
FastStock
▪ Provides electronic
inventory
management
solutions
▪ Optimizes stocking
levels based on
usage data, patterns,
and trends
▪ Bins that contain high
volume consumables
▪ Planograms and
labeling provide
greater inventory
visibility
▪ Reduces freight
expenses through
careful inventory
planning
▪ Most widely used
industrial vending
platform with >100k
units
▪ Diverse lineup of
machines
▪ Dynamic reporting
and real-time data
▪ Helps reduce
consumption and
drive productivity
▪ Founded in 1967 in Winona, MN as a distributor
of industrial goods
▪ Offers array of supply chain and distribution
solutions with focus on proximity to customer
▪ Streamline shift to onsite locations
▪ Prioritization of national accounts
▪ Continue technological innovation of distribution
▪ Extensive fleet of trucks that allows for 90% of
product tonnage to be shipped using own trucks
Value-Add
▪ Competes on value proposition and proximity to
clients instead of cost, resulting in high retention
Locations
US
CA & MX
Other
$6.9B
34%
21%
8%
8%
7%
6%
5%
12%
Fasteners
Safety Supplies
Tools
Janitorial Supplies
Hydraulics
Material Handling
Cutting Tools
Other
$6.98B
Distribution centers provide over 4.9M sq. ft. of capacity globally
3,306 Locations
1,625 Onsite
1,683 Branches
8. Value-Add
Supply Chain In-Depth Analysis
Suppliers Customers
96% of Fastenal FY22 net sales were attributable to products
manufactured by other companies
Seeks to become an end-to-end supply chain partner instead
of a middleman by going the extra mile for customers
Made of commercial players ranging in sizes that are less
price sensitive due to Fastenal’s proximity and efficiency
Fastenal’s key differentiator among distributors is its complex and innovative capabilities
8
Source: Company Filings, Team Projections
Note: Labor productivity calculated as total revenue / total employees
Labor Productivity
Direct control over distribution and utilizes its
own capacity to provide LTL services through
Blue Lane Freight, lowering freight costs
Operates 9 facilities for in-house
manufacturing, serving as a differentiator and
creating sticky customer relationships
Shift toward onsite locations, branch closures, and
automation in warehouses has led to greater sales/employee
King of Efficiency
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
2019 2020 2021 2022
▪ Low concentration (<5% of FY22 sales)
▪ E-commerce channel, integrated
purchasing, warehouse automation,
and its proximity through onsite
locations are difficult for small players to
replicate
▪ Vending solutions cut consumption
42.6% of FY22 Sales 29.6% of FY22 Sales 10.9%
10.3%
6.6%
▪ Due to Fastenal’s size, suppliers offer
volume-based rebates and other sales
incentives unavailable to small players
▪ Suppliers give preferential treatment to
Fastenal through marketing support and
product training
▪ Allows it to cost-efficiently
promote its product catalog
▪ Only one supplier accounted for 5% of
inventory purchases in 2022
Fastenal uses a process called Fastenal Managed Inventory (FMI) that allows inventory to remain as lean as possible. Its industrial
vending solutions also allow for greater tracking and planning of inventory through RFID chips, IoT, and data analytics.
JIT
Inventory
▪ Fastenal retains ownership of inventory within onsite locations until
supplies are consumed, taking just-in time management to a new level
▪ Headwind to gross margins during deflation, tailwind in inflationary periods
▪ 11 distribution centers operate automated
storage and retrieval systems
▪ Make up 95% of picking activity
▪ Lowers labor costs, improving margins
145.0
150.0
155.0
160.0
165.0
170.0
175.0
180.0
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
2015 2016 2017 2018 2019 2020 2021 2022
Working Capital
Days Inventory
9. Since 2008 Apex and FAST worked closely to
bring industrial vending solutions to clients.
Apex designed and created the software and
equipment while FAST brought industry
expertise and a leading market presence. On
March 20, 2020 FAST acquired assets relating
to the perpetual and unfettered use of patents,
designs, software and licenses, as well as direct
access to their supply chain for $125M.
Commentary
Management Team & Highlighted Transaction
Management Team
Fastenal is led by a dedicated management team with long tenures and vast experience
9
Source: Company Filings
Daniel Florness
CEO
▪ Began career with Fastenal in 1996
▪ Previously CFO from 2002 – 2015
▪ Spearheaded shift from branch to
onsite locations
▪ Involved in Apex Industrial
Technologies (2020) and Fasteners
(2015) deals
▪ BS from University of Wisconsin-
River Falls
Holden Lewis
CFO
▪ Began career in equity research with
industrials coverage from 1994-2016
▪ Joined Fastenal in 2016
▪ EVP and CFO since 2022
▪ Manages and executes company
strategy relating to profitability,
efficiency, and assets
▪ Involved in Manufacturers Supply
Company (2017) deal
Bill Drazkowski
Executive VP
Sales
▪ Began career with Fastenal in 1995
▪ Became district manager in 2007
▪ From 2016 – 2019 was EVP of
national account sales and promoted
to EVP of sales in October 2019
▪ Responsibilities include sales and
operational oversight of Fastenal’s
western US business
▪ BBA from Winona State University
1987
Historical Events
IPO – raised $5M
1992
200 locations and
introduction of onsite
1997
644 stores with $398M
in revenue
1996
484 stores with $287M
in revenue
1993
Begins new product
lines to diversify
2013
Stores peak at 2,687
locations
2014
Branch closures and
focus on onsite growth
Current Strategy and Guidance
Digital channel growing to >80% of sales
Expansion of onsite locations
Focus on national accounts
Diversifying non-fastener revenue
Trusted end-to-end supply chain partner
▪ Growth strategy used to be focused on opening
branches; now focused on expansion of onsite
▪ Onsite locations provide stickier and
contractually-bound revenues
▪ National accounts have longer terms and better
labor leverage but more negotiating power
$125M
10. 1,300
1,350
1,400
1,450
1,500
1,550
1,600
1,650
1,700
1,750
2022 2023 2024 2025 2026 2027
1,400
1,600
1,800
2,000
2,200
2,400
2,600
2022 2023 2024 2025 2026 2027
Analysis
Analysis
Revenue Build
Financial Analysis
Historical and projected financials show strong growth and diversification initiatives
10
Source: Bloomberg, Company Filings, Team Projections
Note: Underinvested sectors include nonresidential construction, oil & gas, and mining
Company Statistics
Market Cap ($M) $30,735
Shares Out. (M) 571
Net Debt/Total Capital 1.8%
Dividend Yield 2.6%
Enterprise Value ($M) 31,307
52 Week High $60.72
52 Week Low $43.73
FY22 Financials ($M)
Revenue $6,980
Gross Profit $3,215
Gross Margin 46.1%
Operating Income $1,454
Operating Margin 20.8%
EBITDA $1,742
EBITDA Margin 24.9%
Net Income $1,086
EPS $1.89
Capital Structure
Fastenal historically has relied
on using little or no debt, which
allows it to maintain its
financial flexibility through the
business cycle. It currently
has a 0.16 debt/equity ratio.
Branch/Onsite Projections
Analyst Consensus
Average Sales Per Branch ($M)
Onsite location
growth higher than
consensus due to
reshoring prospects
Average Sales Per Onsite ($M)
Branch locations lower
than consensus due to
mix shift
Projected Revenue
CAGR: 8.4% CAGR: 11.8%
Branch Revenue
Onsite Revenue
Other Revenue
Consensus
Expenses Build
FY Beg. Gross Margin Mix Price/Cost Freight End. Gross Margin YOY bps
2022 -0.30% -0.20% 0.28% 46.1% -22
2023 46.1% -0.75% -0.20% -0.20% 44.9% -115
2024 44.9% -0.50% 0.0% 0.0% 44.4% -50
2025 44.4% -0.50% 0.0% 0.0% 43.9% -50
2026 43.9% -0.30% 0.0% 0.0% 43.6% -30
2027 43.6% -0.30% 0.0% 0.0% 43.3% -30
43.0%
43.5%
44.0%
44.5%
45.0%
45.5%
46.0%
46.5%
2020 2021 2022 2023 2024 2025 2026 2027
Gross Margin Projections
Gross Margin Consensus
Gross margin forecasted to decline as
Fastenal diversifies into lower margin
products and services
Gross margin erosion slowing over time
as onsite signings slow down in 2026 and
2027
Branch %
Onsite %
Other %
Operating Margin
Consensus
As mix shifts to onsite,
operating margin
increases
Capital Allocation
▪ Onsite location growth higher in earlier
years from national accounts and pent up
demand from underinvested sectors
▪ Average sales/branch increasing due to
branch closures and steady revenue
▪ Better labor leverage and lower
administrative costs associated with
onsite locations and national accounts
▪ ~200 bps operating margin increase from
2021 to 2027
Began paying cash dividends
in 1991 and has consistently
increased dividends since.
Share buybacks are less
frequent but the most
significant buyback activity
was in 2015 when Fastenal’s
stock was viewed as under-
valued and took on debt to
repurchase 7.1M shares
for $239M.
Margin Profile
Fastenal’s margin profile has
changed significantly since
its diversification into lower
margin products. In 1992,
the year before Fastenal
began diversifying beyond
threaded fasteners, its
gross margin was 53.8%
from 2014 onward, gross
margin began to steadily
decline, bottoming out at
45.5% in 2020
$2.4
$2.8
$3.0
$3.3 $3.5 $3.6
2022 2023 2024 2025 2026 2027
$1.6
$1.9
$2.2
$2.5 $2.6 $2.8
2022 2023 2024 2025 2026 2027
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
2020 2021 2022 2023 2024 2025 2026 2027
20.0%
20.5%
21.0%
21.5%
22.0%
22.5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2020 2021 2022 2023 2024 2025 2026 2027
CAGR: 12.1%
11. $1.30
$1.80
$2.30
$2.80
$3.30
$3.80
2020 2021 2022 2023 2024 2025 2026 2027
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
2023 2024 2025 2026 2027
Projected EBITDA
Financial Analysis
Fastenal boasts exemplary capital allocation and growth among distribution peers
11
Source: Bloomberg, Team Projections
EPS
EBITDA ($M)
CAGR: 11.8%
EBITDA ($M)
Consensus ($M)
Base Case Projections
Analyst Consensus
Bear Case
Capital Allocation ($ M)
Projected FCF
$3.61
$2.82
$2.45
Bearish EPS projections assume an
unfavorable mix with higher gross
margins but higher operating expenses
FCF ($M)
Consensus ($M)
FCF driven by strong growth, profitability, and
increasing inventory efficiency (low Days
Inventory)
CAGR: 13.6%
0%
20%
40%
60%
80%
100%
120%
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
2014 2015 2016 2017 2018 2019 2020 2021 2022
Dividends
Share Repurchases
% CFO
Operations generate high
degree of excess cash
flow, organic growth
strategy minimizes
acquisitions
Provides floor to short-
term weakness in equity
markets
Capital Expenditures
Daily Sales Growth
1%
2%
3%
4%
5%
$0
$50
$100
$150
$200
$250
$300
2015 2016 2017 2018 2019 2020 2021 2022
Capex ($ M)
Capex/Revenue
Grainger Capex/Sales
MSC Capex/Sales
Capex/Revenue significantly
higher than peers
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
2022
2021
2020
2019
2018
2017
2016
2015
Fastenal
MSC Industrial
Grainger
Outgrows peers during downturns (2019 and 2020)
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
2020 2021 2022 2023 2024 2025 2026 2027
$1,421
$1,500
$1,743
$1,959
$2,272
$2,580
$2,854
$3,096
2020 2021 2022 2023 2024 2025 2026 2027
12. Fastenal ROIC Among Best For Distributors
High ROIC indicative of further shareholder value creation
12
Source: Bloomberg, Company Filings
Note: NOPAT defined as tax-effected EBIT, Invested Capital defined as shareholders’ equity plus net det
ROIC Decomposition Across Distributors
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
0.0x 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x 3.5x 4.0x 4.5x 5.0x
NOPAT
Margin
IC Multiplier
NOPAT Margin X IC Multiplier = ROIC
NOPAT Margin: Tax-effected EBIT/Revenue
IC Multiplier: Revenue from invested capital base
ROIC improves through increasing either factor;
companies grow ROIC by improving margins or through
generating more revenue from existing capital base
ROIC > WACC: several outlets for value creation
• Increasing Invested Capital base
• Improving IC multiplier
• Improving NOPAT margin
WACC > ROIC: increasing invested capital is value
destructive unless underlying components improve
ROIC Curve
10% 20% 30%
10%
20%
30%
2020
2021
2022
2020
2021
2022
2021
2020
2022
2020
2021
2022
2022
2021
2020
2020
2022
2021
Rising capital
efficiency
Rising margins
ROIC
Distributors on a ROIC curve of
>20% typically trade at much
higher P/E ratios than peers
Boasts highest in-class margins
13. 3 Year Annotated Share Price Performance and Analyst Ratings
1 2 3
13
Source: Bloomberg, Company Filings
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
$20.00
$25.00
$30.00
$35.00
$40.00
$45.00
$50.00
$55.00
$60.00
$65.00
$70.00
2020 2021 2022 2023
Q1 – ’20 EPS of
$0.35 beat
consensus by 2%
Q2 – ’20 EPS of
$0.42 beat
consensus by 15%
Q3 – ’20 EPS of
$0.38 beat
consensus by 2%
Q4 – ’20 EPS of
$0.34 beat
consensus by 3%
1
2
Reopened doors of 900
branches and shifted sales mix
to safety products (PPE, etc.)
Concerns about spot prices for
inputs due to inflation weighed
on the industrials sector
Q1 – ’21 EPS of
$0.37, beat
consensus by 1%
Q2 – ’21 EPS of
$0.42 beat
consensus by 2%
Q3 – ’21 EPS of
$0.42 beat
consensus by 1%
Q4 – ’21 EPS of
$0.40 beat
consensus by 7%
Q1 – ’22 EPS of
$0.47 beat
consensus by 5%
Q2 – ’22 EPS of
$0.50 beat
consensus by
0.2%
Q3 – ’22 EPS of
$0.50 beat
consensus by 4%
Q4 – ’22 EPS of
$0.43 beat
consensus by 3%
3
Ongoing branch closures,
larger accounts (buyer power),
and negative price/cost mix
Analyst Ratings Earnings Call Analyst Questions
0%
50%
100%
$40
$45
$50
$55
$60
Strong Buy Hold
Sell Strong Sell
Target Price
Projected EPS
$0.50
$0.52
$0.50
$0.44
$0.51
$0.54 $0.54
$0.48
1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24
FAST EPS (Last 5 Years) Count Average Surprise Average Price Performance (1 Day)
Beats 17 4.3% 0.0%
Misses 4 -0.7% -1.1%
“Is the Fastenal cost
structure more or less
variable today”
Operating leverage from
onsite location signings
“Have you seen any
softening in
manufacturing”
Gross margin pressures
in 2023 from current mix
and price/cost
15. Industry Operators
Industrial Distribution Overview
2 Types
Service and Selection Turnover and Velocity
A glimpse at the highly fragmented and competitive industry
15
Source: Bloomberg, Baird, BCG, IBISWorld, IndustrialDistribution.com
Note: Market share estimated from FY22 revenue for the most relevant reported operating segments
Overview
▪ Distributors move industrial goods through the supply chain to key end markets
including manufacturing, construction, and retail customers
▪ Fastenal’s management estimates that the TAM of the space is $140B
▪ Industry expected to grow at a 5.12% CAGR to 2027
▪ Pandemic and geopolitical tensions spurred interest in more transparent supply
chains and need for industry services
Trends & Success Factors
▪ Carry wide array of inventory with low turnover
▪ Derive revenue and supplies from a wider base meaning more
negotiating power and less customer concentration
▪ Products tend to be specialized and hard to find like plumbing and
auto parts, resulting in gross margins of 20% or more
Key
Trends
Success
Factors
Omnichannel connectivity and IoT technology
to track, predict, and report inventory
Connectivity
AI and machine learning tools to automate
back office roles and overhead functions
Automation
High demand and competition for analytics
and technologies that illuminate supply chains
Visibility
Vendor consolidation toward large national
distributors weighing on small players
Consolidation
Effective inventory management leads to
lower inventory costs and thus better pricing
Efficiency
Large players in distribution have greater
purchasing power and economies of scale
Scale
Diversification of products and services and
expanding channel coverage creates value
Expansion
Differentiation and building trust as a end-to-
end supply chain partner creates strong ties
Client Focus
▪ Have valuable or perishable inventory resulting in high turnover
▪ Tend to have smaller and less diverse supplier and customer base,
limiting pricing flexibility and increasing customer concentration
▪ Compete on efficiency, quality, and low delivery costs instead of
availability and convenience, resulting in gross margins of <20%
Industry Rivalry
4%
4% 2% 3%
0%
87%
WW Grainger
Fastenal
Ace Hardware
MSC Industrial
DSGR
Other
$140B
Price sensitivity
greater for simple
products than
specialized ones
Low barriers to
entry though
unprofitable for
smaller players
High supplier
power due to
high region
concentration
High due to low
product and
service
differentiation
Buyers Entrants Suppliers Substitutes
Operating
Margin
21%
15%
13%
9%
7%
4%
FAST
GWW
MSM
AIT
WCC
DSGR
16. Macroeconomic and Market Overview
16
Source: Bloomberg, FRED, IBISWorld, ISM, P&M Corporate Finance
Note: Fastenal proxy PPI calculated as weighted Total Manufacturing PPI (65%) and Threaded Fastener PPI (35%)
Commentary Key Industry Revenue Drivers
Industrial Production Index PMI Producer Price Index
70.0
75.0
80.0
85.0
90.0
95.0
100.0
105.0
110.0
1/19
5/19
9/19
1/20
5/20
9/20
1/21
5/21
9/21
1/22
5/22
9/22
1/23 30.0
35.0
40.0
45.0
50.0
55.0
60.0
65.0
70.0
1/19
5/19
9/19
1/20
5/20
9/20
1/21
5/21
9/21
1/22
5/22
9/22
1/23
Value above 50 indicates expansion
80
100
120
140
160
180
200
220
240
260
280
1/19
5/19
9/19
1/20
5/20
9/20
1/21
5/21
9/21
1/22
5/22
9/22
1/23
Despite slowing manufacturing indicators, a recent survey
by PwC found that 70% of CEOs are confident in continued
growth due to secular growth trends from reshoring and
legislation like the IIJA and IRA
Even with rising interest rates and supply chain disruptions,
nonresidential construction has pent up demand from
underinvestment during the pandemic, as evidenced by the
Architecture Billings Index in expansion for the last 15 months
-10.00%
-5.00%
0.00%
5.00%
10.00%
2015 2016 2017 2018 2019 2020 2021 2022
Revenue IPI Construction
Inflation and Pricing
1.43%
-7.7%
4.4%
Commodity markets were shaped by the dollar in 2022 and
will likely be shaped by underinvestment in 2023. To
prevent shortages, capex will have to go into oil & gas,
mining, and agriculture – all key Fastenal end markets
Deflation in steel and transportation costs may lead to lower fastener
pricing in 2023 and erode gross margins. We don’t believe this is a
headwind for Fastenal if utilization remains strong as its business
model isn’t built on pricing, but rather its value proposition to
customers. Its national accounts program may also impact its
pricing power in order to win larger national contracts. This will be
offset by a gain in market share and improved operating
margins because of the lower administrative costs associated with its
onsite services that national accounts prefer.
PMCF’s index of public distribution companies’ mean
EV/EBITDA fell in 4Q22 (9.4x) relative to 4Q21 (14.0x) due to
concerns of rising interest rates, inflation, and geopolitical
factors. Currently lower than the S&P500 average of 12.5x
Manufacturing PPI
Fastenal Proxy PPI
Fastener/Bolts PPI
During high overall pessimism, there’s conflicting indicators and great potential
18. Market TAM 2023 TAM 2024 TAM 2025 TAM 2026 TAM 2027
Industrial Distribution 140.0 147.1 154.6 162.5 170.8
Growth % 5.1% 5.1% 5.1% 5.1%
Fastenal % Penetration 4.0% 5.0% 6.0% 7.0% 8.0%
Revenue $5.6 $7.4 $9.3 $11.4 $13.7
Thesis
Reshoring Tailwinds
Fastenal’s onsite model is tailored to manufacturers that are more likely to reshore
18
Source: Baird, Bloomberg, Company Filings, Reshoring Initiative, Team Projections, Thomas’ State of North American Manufacturing Report
Reshoring Fastenal National Accounts Program
Legislation
Where Infrastructure Dollars Are Going (in $B)
▪ Rising costs in China and
other countries, export
restrictions, and legislation
are incentivizing the shift
▪ 83% of North American
manufacturers are likely or
extremely like to reshore
▪ Can drive as much
as $443B in US
economic value
▪ Helps mitigate IP & ESG risk
579,811
manufacturing
businesses in the
US
12,000
potential
clients for
onsite
Fastenal management estimates
for customer locations with
potential to implement the onsite
model
Using our model’s average sales per
location of $1.8M per onsite location in
2023, this represents a $21.6B opportunity
for Fastenal since new sites need
significant MRO and OEM parts to begin
operations
$22B
▪ $1T Infrastructure Investment & Jobs Act signed in late 2021 with a
spending cycle likely beginning in early 2023
▪ Executive Order 14017 which states that components used to
manufacture products that are mined, produced, or assembled in the US
must be >55% of the total cost of all components
▪ Manufacturing production tax credits from the Inflation Reduction Act
$110
$66
$39
$25
$17
$27
Roads & Bridges
Passenger & Freight Rail
Public Transit
Airports
Ports & Waterways
Other
Transportation
Infrastructure
$65
$65
$55
$50
$21
$8
Power
Broadband
Water
Climate
Environmental
Other
51.0%
52.0%
53.0%
54.0%
55.0%
56.0%
57.0%
58.0%
59.0%
0
200
400
600
800
1000
1200
1400
1600
1800
2019 2020 2021 2022
Onsite Locations
National Accounts (as % of sales)
58%
42%
40%
60%
FY12
Sales
Top Down Analysis (in $B)
FY22
Sales
National
National
Non-
National
Non-
National
▪ Reshoring will drive Fastenal’s TAM growth
▪ With prioritization of national accounts, it will
likely outcompete peers in market share, given
national accounts’ higher probability of
reshoring
▪ Analysts assume growth in market share due
to reshoring will be distributed evenly
3
1
2
1 Management estimates for addressable market size
3
2 Taken from Industrial Distribution CAGR of 5.12%
Assumed 100 bps of annual growth from reshoring
19. Bullwhip
Effect
Supply Chain Relief and Bullwhip Effect
OEM and MRO customers need support during supply chain turmoil and related effects
19
Source: Bloomberg
Strong Need for Inventory Management Manufacturing Inventory/Sales Ratio
What The Market Isn’t Seeing
Demand whip
Overestimates
orders and forecasts
Overestimates
demand
Overproduces
Bullwhip Effect Illustration
▪ Supply chain phenomenon in which small
demand changes from end markets are
magnified by upstream manufacturers and
suppliers that boost production beyond a level
supported by those end markets
Manufacturers
Customers
Impacts
▪ Increased storage costs
▪ Increased labor costs
▪ Deflationary due to price cuts
Government stimulus during the pandemic and
underinvestment in nonresidential construction, oil & gas,
and mining sectors led to demand shocks that are
outpacing manufacturing and general production capacity
1.40
1.50
1.60
1.70
1.80
1.90
▪ As reshoring and infrastructure spending tailwinds continue,
OEM and MRO customers are going to want to prevent a
repeat of 2020’s bullwhip effect, creating more onsite signings
▪ Analysts focus on IPI and PMI but overlook inventory/sales or
bullwhip effect indicators in reports
▪ Supply chain visibility through Fastenal Managed Inventory
(FMI), IoT technology, data analytics, and fast lead times
all help prevent the bullwhip effect and cater to client’s working
capital needs during a difficult environment.
Supply chain disruptions have spurred technology
investments in areas of inventory and supply chain
visibility, which Fastenal’s FMI technologies, FAST360,
and lean solutions all provide
The distribution landscape has shifted toward a “what can
you do for me?” mentality among customers. Fastenal’s
integrated capabilities allows it to provide real time cost
savings and build strong relationships with customers.
By embedding its presence within a customer site,
Fastenal has a direct window into conditions and
inventory replenishment needs, and mitigates excess
consumption through its industrial vending solutions
Metric Current YOY M/M
Machinery Inventory/Sales 1.7 -19.3% -26.0%
Component Inventory/Sales 2.3 25.1% 31.6%
Fabricated Metals Inventory/Sales 1.7 -1.2% -2.3%
Component Inventory/Sales ratio still rapidly
increasing month over month – indicating future
demand for FAST products
Fastenal’s position in the supply chain allows it to curtail the bullwhip effect
Retailer Distributor
20. Recession Resilience
Fastenal’s ability to adapt to many different macroeconomic environments will boost sentiment
20
Source: Alta Fox Capital, Company Filings
Fastenal Relative Performance
Incoming Recession Makings of a Multibagger
▪ An analysis of best performing stocks (>350% TSR) in the
past 8 years found that EBITDA growth and multiple
expansion were the greatest contributors to TSR
59.82%
44.78%
1.63%
33.65%
65.71%
EBITDA Growth
Mutliple Expansion
Dividends
Median Average
Total Shareholder Return Drivers
91%
Of outperforming companies had moderate competitive
advantages relative to peers
27%
Of outperforming companies launched transformative new
products or services like the FAST Solutions platform
12%
Of outperforming companies realized multiple expansion as
a result of mitigating a crisis
▪ Consensus for the probability of a recession in 2023 is 58%
▪ Outperformed the S&P500 during COVID-19 as a result of its
Customer Fulfillment Centers having less customer-facing
presence (low labor) and shift to sale of safety equipment
▪ Inelastic need for MRO parts also helps offset demand slumps
▪ As geopolitical tensions rise and clients prepare for the
incoming slowdown, onsite signings may increase
▪ During both the manufacturing recession in 2019 and
the 2020 recession onsite locations grew more YOY
than in 2021 (25% and 14%, respectively)
▪ Posted better sales growth than top competitor in 2019 and
2020 (5.9% and 7.4%, respectively) vs Grainger’s (2.7% and
2.4%, respectively). Operating margin also expanded 40 bps
in 2020 vs Grainger’s 235 bps contraction.
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
FASTENAL S&P 500 PR
Large economic moat and competitive advantages
FCF increase during downturns due to change in NWC
Increase in onsite signings = recurring revenues
Operating margin expansion = higher ROIC
Increase in investor sentiment
Total Return (%) 2020 - 2021 2021 - 2022 2022 - 2023
FAST 36.6% 34.0% -24.0%
S&P 500 18.4% 28.7% -18.3%
MSCI USA Industrials 11.1% 21.1% -5.5%
Total Return (%) Recession 2008 - 2009 2019 - 2020 2020 - 2021
FAST -12.1% 45.0% 36.6%
S&P 500 -37.0% 31.5% 18.4%
MSCI USA Industrials -41.3% 29.3% 11.1%
22. Value
Drivers
Discounted Cash Flow Analysis
22
Source: Bloomberg, Team Projections
Note: Figures in $MM USD
Base Case Value Driving Assumptions
Value
Detractors
▪ 15.9x EBITDA multiple one turn below its 10-year median of 16.9x
▪ Sales growth erosion in later years due to potential for generics entering the market
▪ Higher Capex/Revenue than peers
Key Assumptions Projections
Sensitivity Analysis
▪ High sales growth from onsite signings due to reshoring and onshoring prospects
▪ Operating margin expansion from favorable sales mix (more onsite signings and national accounts)
▪ Improving inventory efficiency and lower change in NWC due to higher Days Payable during downturns
▪ Assumed a 15.9x EV/EBITDA
exit multiple – 1 turn below its
10-year median of 16.9x
▪ Assumed a 3.5% PGR based
on the maturity of the industrial
distribution industry and the
current rate of inflation
▪ WACC of 8.32%
Unlevered FCF
Discounted Cash Flow Analysis 2023 2024 2025 2026 2027
Revenue $8,267 $9,466 $10,651 $11,640 $12,523
% Growth 14.5% 12.5% 9.3% 7.6%
Less: COGS 4554 5261 5973 6563 7098
Gross Profit $3,713 $4,205 $4,678 $5,077 $5,425
% Margin 44.9% 44.4% 43.9% 43.6% 43.3%
Less: Operating Expenses 2002 2217 2388 2540 2670
Operating Income $1,711 $1,988 $2,290 $2,538 $2,755
% Margin 20.7% 21.0% 21.5% 21.8% 22.0%
Less: Taxes at 25% 428 497 572 634 689
NOPAT $1,283 $1,491 $1,717 $1,903 $2,066
Plus: Depreciation & Amortization 248 284 290 317 341
Less: Change in NWC 192 372 297 319 216
Less: Capital Expenditures 211 241 272 297 319
Unlevered Free Cash Flow $1,128 $1,162 $1,439 $1,604 $1,872
Years 1.0 2.0 3.0 4.0 5.0
PV of Unlevered Free Cash Flow 1,042 990 1,132 1,165 1,255
PV of Projection Period $5,584
Growth Rate 3.5%
Terminal Value $40,194
PV of Terminal Value $26,953
Enterprise Value $32,538
Implied Share Price $56.00
Perpetuity Growth Rate
2027 EBITDA $3,096
EBITDA Exit Multiple 15.9x
Terminal Value $49,221
PV of Terminal Value $33,006
Enterprise Value $38,591
Implied Share Price $66.60
EBITDA Exit Multiple
$56.00 $66.60
$60.00
65% 35%
$56.00 3.0% 3.3% 3.5% 3.8% 4.0%
7.8% $57.02 $59.77 $62.84 $66.29 $70.20
8.1% $54.05 $56.51 $59.24 $62.28 $65.70
8.3% $51.35 $53.56 $56.00 $58.70 $61.72
8.6% $48.91 $50.90 $53.09 $55.50 $58.18
8.8% $46.68 $48.48 $50.45 $52.62 $55.01
WACC
Perpetuity Growth Rate
$66.60 15.3x 15.6x 15.9x 16.2x 16.5x
7.8% $65.87 $66.98 $68.10 $69.22 $70.33
8.1% $65.14 $66.24 $67.35 $68.45 $69.55
8.3% $64.42 $65.51 $66.60 $67.69 $68.78
8.6% $63.71 $64.79 $65.87 $66.95 $68.03
8.8% $63.02 $64.08 $65.15 $66.21 $67.28
WACC
EBITDA Exit Multiple
$1,128 $1,162
$1,439
$1,604
$1,872
2023 2024 2025 2026 2027
23. Value
Drivers
Discounted Cash Flow Analysis – Bear Case
23
Source: Bloomberg, Team Projections
Note: Figures in $MM USD
Bear Case Value Driving Assumptions
Value
Detractors
▪ Higher gross margins due to higher branch and non-national accounts sales mix
▪ Assumed same unlevered capital structure
▪ Assumed fairly stable operating margins with a 50 bps increase in later periods as onsite locations slowly grow
▪ Lower operating margins than base case due to sales mix (non-national accounts and branches)
▪ Revenue growth erosion from macro headwinds and sales team being unable to expand branch and onsite average sales
▪ Higher payment terms of customers (Days Receivable) leading to higher NWC. Assumed higher Capex.
Projections
Key Assumptions
▪ Assumed a 14.9x EV/EBITDA
exit multiple – 2 turns below its
10-year median of 16.9x
▪ Assumed a 3.5% PGR based
on the maturity of the industrial
distribution industry and the
current rate of inflation
▪ WACC of 8.32%
Unlevered FCF
$39.00 $43.80
$40.70
65% 35%
Sensitivity Analysis
Discounted Cash Flow Analysis 2023 2024 2025 2026 2027
Revenue $7,564 $8,091 $8,513 $8,855 $9,135
% Growth 7.0% 5.2% 4.0% 3.2%
Less: COGS 4137 4442 4682 4871 5024
Gross Profit $3,427 $3,649 $3,831 $3,985 $4,111
% Margin 45.3% 45.1% 45.0% 45.0% 45.0%
Less: Operating Expenses 1907 2026 2077 2161 2229
Operating Income $1,520 $1,623 $1,754 $1,824 $1,882
% Margin 20.1% 20.1% 20.6% 20.6% 20.6%
Less: Taxes at 25% 380 406 438 456 470
NOPAT $1,140 $1,217 $1,315 $1,368 $1,411
Plus: Depreciation & Amortization 206 231 220 229 236
Less: Change in NWC 250 166 71 75 94
Less: Capital Expenditures 227 243 255 266 274
Unlevered Free Cash Flow $869 $1,039 $1,208 $1,257 $1,280
Years 1.0 2.0 3.0 4.0 5.0
PV of Unlevered Free Cash Flow 802 886 951 913 858
PV of Projection Period $4,410
Growth Rate 3.5%
Terminal Value $27,481
PV of Terminal Value $18,428
Enterprise Value $22,837
Implied Share Price $39.01
Perpetuity Growth Rate
2027 EBITDA $2,118
EBITDA Exit Multiple 14.9x
Terminal Value $31,557
PV of Terminal Value $21,161
Enterprise Value $25,571
Implied Share Price $43.79
EBITDA Exit Multiple
$39.01 3.0% 3.3% 3.5% 3.8% 4.0%
7.8% $39.71 $41.60 $43.70 $46.06 $48.72
8.1% $37.68 $39.36 $41.22 $43.31 $45.64
8.3% $35.83 $37.34 $39.01 $40.85 $42.92
8.6% $34.15 $35.52 $37.01 $38.66 $40.49
8.8% $32.62 $33.85 $35.20 $36.68 $38.32
WACC
Perpetuity Growth Rate
$43.79 14.3x 14.6x 14.9x 15.2x 15.5x
7.8% $43.24 $44.01 $44.77 $45.54 $46.30
8.1% $42.77 $43.52 $44.28 $45.03 $45.79
8.3% $42.30 $43.05 $43.79 $44.54 $45.29
8.6% $41.84 $42.58 $43.32 $44.05 $44.79
8.8% $41.38 $42.11 $42.84 $43.57 $44.30
WACC
EBITDAExit Multiple
$869
$1,039
$1,208
$1,257 $1,280
2023 2024 2025 2026 2027
24. Comparable Companies Analysis
Premium asset, with room for further multiple expansion
24
Source: Bloomberg, Company Filings
Note: Figures in $MM USD
P/E Multiples
Forward EV/EBITDA Multiples
3.5X
5.5X
7.5X
9.5X
11.5X
13.5X
15.5X
17.5X
19.5X
21.5X
3/30/2022 6/30/2022 9/30/2022 12/31/2022 3/31/2023
FAST
GWW
MSM
DSGR
WCC
▪ FAST’s differentiated product offerings are scalable
and have high growth potential, mitigating risk of
new entrants
▪ Risk pushes down peers’ multiples due to
decreased competitive advantages that eat into
probable growth rate and margins
▪ Doesn’t compete on cost – competes on value-add
▪ While it is great to buy at a low multiple, many top
performers already traded at healthy multiples that
expanded further
FAST
Peers
▪ The market rewards high ROICs as Fastenal and
WW Grainger both trade at a premium to other
distributors and have the highest operating margins
▪ Fastenal has industry leading exposure to
innovative solutions and product offerings, allowing
it to trade a premium
Share % of Market Enterprise Price
Company Name Ticker Price 52-Wk. High Cap Value Earnings LTM 2023E LTM 2023E LTM 2023E LTM EBITDA NTM EBITDA LTM Revenue NTM Revenue
Wesco International WCC 142.54 81.5% 7,593 12,808 8.6x 1,689 1,867 21,420 22,925 7.9% 8.1% 7.6x 6.9x 0.6x 0.6x
Grainger GWW 656.68 92.6% 33,929 35,681 22.2x 2,398 2,652 15,228 16,495 15.7% 16.1% 14.9x 13.5x 2.3x 2.2x
MSC Industrial Direct MSM 83.64 92.9% 4,640 5,507 12.8x 585 571 3,900 3,879 15.0% 14.7% 9.4x 9.6x 1.4x 1.4x
Distribution Solutions Group DSGR 42.88 76.6% 863 1,270 20.0x 123 147 1,115 1,401 11.0% 10.5% 10.4x 8.6x 1.1x 0.9x
Applied Industrial Technologies AIT 135.54 90.7% 5,380 5,716 17.3x 478 503 4,165 4,347 11.5% 11.6% 12.0x 11.4x 1.4x 1.3x
Fastenal 30,838 28.0x 1631 1,678 6981 7355 23.4% 22.8% 18.9x 18.4x 4.4x 4.2x
EBITDA Revenue Enterprise Value
EBITDA Margin
26. Sales
Local businesses transitioning into national accounts
Nonresidential construction
Managers
Channel Research
Select Insights from Customer Fulfillment Centers (CFCs)
26
Source: Proprietary surveys of several Fastenal CFCs across Ohio, Indiana, and Illinois
Jack Bishop
District Manager
Cincinnati, OH
▪ Began career with Fastenal in 2010
▪ DM for four years and experience in
running an onsite from 2015-2019
▪ Sees Fastenal as more of a strategic
business partner than a distributor
▪ Current industry is a "what have you
done for me lately" business
▪ Sees uptick in nonresidential
construction for the summer
▪ Began career with Fastenal in 2017
▪ Became general manager in 2020
▪ Very prideful of Fastenal’s
technology integration – though he
sees technological developments
outpacing implementation
▪ Believes using data-driven findings
can convert customers that are more
resistant to tech integration
Brandon Daggy
General Manager
Bloomington, IN
▪ Began career with Fastenal in 2016
▪ DM since 2021 with experience in
account management
▪ Although looms of an incoming
recession, sees strong outlook in
construction and heavy machinery
manufacturing
David Vyskocil
General Manager
Lombard, IL
Channel Insights
Trends
Growth Relative to Last Year Outlook
Current staffing situation and labor market
Onsite signings and sales
Fasteners and specialty items for national accounts
Key Insights and Outlook
▪ Customers become excited about offloading purchasing or inventory
management burdens to Fastenal when they look at Fastenal's services
through a total cost lens rather than a piece price lens.
▪ Expects inventory to be inflated in later 2023 and Fastenal's strong
inventory management allows customers to receive lower prices sooner than
competitors, allowing for more sticky revenue
▪ Biggest barrier to technology is simply people's fear of change, however when
Fastenal provides data and efficiencies that they could drive back into their
business, it's hard for customers to turn away from Fastenal.
▪ Labor situation has improved slightly – labor market is still very tight
▪ Anticipates increased usage of OEM products vs MRO products
▪ Fasteners and specialty items for national accounts have been big drivers
▪ Seeing a lot of success in safety products (PPE) – more competitive space
▪ Not as connected to nonresidential construction but believes it will go up and
will be big for onsite signings
▪ Difficult implementing technological innovations in an “old economy” industry.
Some customers are less receptive to the change though seeing the tangible
impact and cost savings from solutions may make them change their view.
▪ Midwest region (OH, KY, IN, MI) is expecting 13% - 18% YOY sales growth for
the next quarter (next 3 months)
▪ Sees a lot investments in technological capabilities with 150 IT jobs added
▪ Seeing an increase in national accounts throughout the Midwest (~25%)
▪ Local clients Baxter and Cook Group recently became national accounts
▪ Seeing strength in nonresidential construction and heavy manufacturing
▪ Sales breakdown for customers in his region are: Government (30%), Local
Businesses (35%), Construction (10%), and National Accounts (25%)
Heavy manufacturing
Safety product sales
OEM products demand Inventory
MNPI MNPI
27. SWOT
Risks & Mitigating Factors
Key considerations for valuation
27
Source: IBISWorld
Strengths Weaknesses Opportunities Threats
Risks Mitigating Factors
▪ Strong brand recognition
▪ Long history of organic
growth
▪ Exemplary capital
allocation
▪ Large distribution network
▪ Focus on innovation
▪ Reliance on Asian
suppliers
▪ Smaller amount of
product offerings relative
to competitors
▪ Foreign exchange
currency devaluation risk
▪ Manufacturing slowdown
▪ Competition from online
retailers
▪ Technological integration
not fulfilled
▪ Generic vending solutions
entering market
▪ Broadening product
offerings
▪ Further expansion in
technology and new sales
channels
▪ ESG initiatives to capture
EV and renewable energy
customers
E-commerce and players like Amazon Business can
disrupt the space and take market share from Fastenal
Gross margin erosion from mix shift to non-fastener
sales, national accounts, and onsite locations
Suppliers concentrated in Asia and changes in trade
policies due to geopolitical pressures may weigh on them
Industry consolidation in the industrial distribution space
may challenge Fastenal’s product selection and pricing
ESG risk = human capital risk due to a tight labor market
and emission regulations on its fleet of trucks
High touch business model insulates it from E-commerce threats
and Amazon Business is tailored to small players vs national accts
Headwinds to gross margin offset by the lower operating leverage
associated with the mix shift and operating margin expansion
Sourcing capabilities through its wholly-owned Asian subsidiary –
FASTCO Trading and finding manufacturers in North America
Automation of key processes is leading to lower labor costs.
Fastenal may also evolve or invest in its fleet to reduce emissions.
Competes on value proposition and proximity to customers instead
of prices. Its business model allows it to create sticky relationships.
28. Thesis
Final Thoughts
Key considerations
28
Projected EPS Key Highlights
$40.00
$45.00
$50.00
$55.00
$60.00
$65.00
2022 2023
Team Projections
Analyst Consensus
$60 Target Price
Bullwhip
effect and
supply chain
relief
Recession resilience
and investor
sentiment
Reshoring
and
infrastructure
tailwinds
$1.30
$1.80
$2.30
$2.80
$3.30
$3.80
2020 2021 2022 2023 2024 2025 2026 2027
Base Case Projections
Analyst Consensus
Bear Case
$3.61
$2.82
$2.45
Investment
Highlights
Wide economic moat due to large scale – value proposition
unlikely to be replicated by small to mid sized players
Moat
Cash Flow
Innovation
Best in-class margins and cash flow generation with strong capital
returns to investors. Exemplary capital management
Technological innovation of the industrial distribution space;
provides data-driven solutions to maximize efficiency
Findings
▪ Channel checks see anticipated demand in key Fastenal
end markets (nonresidential construction & heavy mfg.)
▪ Looking at strong growth for the next quarter (13-18% in the
Midwest region)
▪ Expect inventory to be inflated at some point in 2023
▪ Seeing more transitions to national accounts