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After reading Fastenal Company's ( NASDAQ:FAST ) latest earnings update (31 March 2019), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether FAST has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways.
How FAST fared against its long-term earnings performance and its industry
FAST's trailing twelve-month earnings (from 31 March 2019) of US$772m has jumped 25% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 9.6%, indicating the rate at which FAST is growing has accelerated. What's the driver of this growth? Let's take a look at if it is merely attributable to industry tailwinds, or if Fastenal has seen some company-specific growth.
In terms of returns from investment, Fastenal has invested its equity funds well leading to a 32% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 22% exceeds the US Trade Distributors industry of 5.7%, indicating Fastenal has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Fastenal’s debt level, has declined over the past 3 years from 37% to 33%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 0.04% to 30% over the past 5 years.
What does this mean?
Fastenal's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research Fastenal to get a more holistic view of the stock by looking at:
- Future Outlook : What are well-informed industry analysts predicting for FAST’s future growth? Take a look at our free research report of analyst consensus for FAST’s outlook.
- Financial Health : Are FAST’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here .
- Other High-Performing Stocks : Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here .
NB: Figures in this article are calculated using data from the trailing twelve months from 31 March 2019. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org . This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.