Last update on 2024-06-06

Fastenal (FAST) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

In-depth 2023 Piotroski F-Score analysis for Fastenal (FAST) reveals strong financial health with 8/9 score, showcasing profitability, liquidity, and operational efficiency.

Short Analysis - Piotroski Score: 8

We're running Fastenal (FAST) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score measures financial strength on a scale from 0 to 9. Fastenal (FAST) has a high score of 8, indicating strong financial health. They have been profitable over several years with a growing positive net income and cash flow from operations, improved return on assets, and an increasing current ratio. Their outstanding shares have decreased, suggesting stock buybacks, and their asset turnover ratio shows they efficiently use assets to generate revenue. However, their leverage ratio has slightly increased and their gross margin has declined a bit.

Insights for Value Investors Seeking Stable Income

Fastenal (FAST) generally shows very positive financial metrics with a Piotroski F-Score of 8/9, indicating it might be a good investment. The company's consistent profitability, strong cash flows, and efficient use of assets are extremely favorable. The only cautious points are the slightly increasing leverage and declining gross margin, but these issues seem minor compared to the overall strong performance. If you're looking to invest in a company with strong fundamentals and financial health, FAST might be worth considering.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Fastenal (FAST)

Company has a positive net income?

Check if Net income of Fastenal (FAST) in 2023 is positive or negative. If the Net income is positive, add 1 point; otherwise, set it to 0.

The Net income for Fastenal (FAST) in 2023 is $1.155 billion, which is positive. With a continuously rising net income over the past 20 years, growing from $84.12 million in 2003, it demonstrates strong financial performance and consistent profitability for the company. This positive net income adds 1 point to the Piotroski score, reflecting a healthy and thriving corporate financial health.

Company has a positive cash flow?

Cash Flow from Operations (CFO) assesses the amount of cash a company generates from its regular operating activities, crucial for sustaining business operations.

Fastenal's CFO in 2023 stands at $1,432,700,000, which is positive. This is a significant increase from previous years, reflecting strong operational performance and effective cash management. Over the last two decades, the CFO has consistently remained positive, demonstrating Fastenal's robust capacity to generate cash from its core activities. This upward trend, particularly the jump from $941,000,000 in 2022 to $1,432,700,000 in 2023, is very promising and adds 1 point in the Piotroski Score, indicating the company's financial health and operational efficiency.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures a company's ability to generate profit from its assets. A higher ROA reflects efficient management and profitability.

In 2023, Fastenal (FAST) reported an ROA of 0.2563, slightly improving from 0.2457 in 2022, thereby earning a point according to Piotroski's criterion for improving ROA. This increase indicates a positive trend in the company’s asset utilization and profitability. Analyzing the historical data for the past 20 years, Fastenal has shown remarkable consistency and gradual improvement in its ROA performance. Compared to the industry median ROA, which experienced occasional variability, Fastenal's ROA has been relatively aligned or slightly below the industry median lately, especially considering the 2023 data (0.2563 for Fastenal vs. the industry median of 0.3023). This year's uptick is favorable and exemplifies continued steady management, hinting at the company's resilience and potential for long-term growth. The operating cash flow fluctuations correlate positively with the increment in ROA, supporting the view that Fastenal’s operating activities are sound and contribute efficiently to its asset returns.

Operating Cashflow are higher than Netincome?

Explain the criterion for Fastenal (FAST) and why it is important to consider

The Operating Cash Flow (OCF) for Fastenal (FAST) in 2023 stands at $1,432,700,000, which surpasses the Net Income of $1,155,000,000. This trend indicates a positive cash flow scenario, signifying efficient cash-generating capabilities from the company's core operations. Historically, Fastenal's OCF has shown a consistent upward trend over the past 20 years, barring a few fluctuations. This consistency in OCF outpacing Net Income is promising because it implies lower earnings manipulation and healthier financial performance. A subtle but significant nuance here is the steady growth in OCF, which has almost doubled over the past decade—from $796,700,000 in 2013 to the current $1,432,700,000. This ratio is critical as it provides more sustainable metrics for evaluating the company’s financial health, reducing the risk of using inflated accounting earnings. As a result, Fastenal earns a full point for this criterion based on Joseph Piotroski's analysis framework.

Liquidity of Fastenal (FAST)

Leverage is declining?

Change in leverage examines whether a company's leverage or debt levels have increased or decreased over a period. Lower leverage is generally seen as positive as it indicates reduced financial risk.

Fastenal's leverage increased from 0.0849 in 2023 to 0.1118 in 2022, showing an upward trend. This higher leverage, reaching its lowest in the last 20 years, reflects a potential rise in financial risks. Historically, the company's leverage fluctuated, but it hovered above 0.11 for much of the past cycle. Stability or a declining trend is favorable, but the slight rise in leverage might concern conservative investors. Therefore, the score for this criterion is 0, indicating a negative trend in leverage level for 2023.

Current Ratio is growing?

The current ratio measures a company's ability to pay its short-term liabilities with its short-term assets.

Fastenal's (FAST) current ratio has increased from 3.9564 in 2022 to 4.5681 in 2023. This suggests an improvement in the company's liquidity position. The 2023 current ratio is significantly higher than the industry median of 2.4086, which further underscores Fastenal's robust liquidity when compared to its sector peers. This increase is beneficial as it indicates improved capacity to cover short-term obligations, earning 1 point in the Piotroski Analysis.

Number of shares not diluted?

This criterion compares changes in a company's outstanding shares year-over-year to determine if there is an expansion or contraction in equity.

In 2023, Fastenal's outstanding shares are reported as 571,271,846 compared to 573,800,000 in 2022. Therefore, Fastenal has decreased its outstanding shares by approximately 2,528,154 shares. The fact that outstanding shares have decreased even modestly is a favorable indicator, earning Fastenal one Piotroski point for this criterion. A reduction in outstanding shares generally indicates buybacks, which often signal that the company believes its stock is undervalued and is a trend favorable to existing shareholders. Historical data also shows a consistent reduction pattern in outstanding shares, supporting this analysis's optimistic outlook. Years like 2009 and 2010, with constant values, show a lack of dilution as well, adding strength to this positive trend in recent years.

Operating of Fastenal (FAST)

Cross Margin is growing?

Change in Gross Margin measures the change in the percentage of revenue that exceeds the cost of goods sold, which indicates the core profitability of a company.

For Fastenal (FAST), the Gross Margin decreased from 0.4607 in 2022 to 0.4566 in 2023, resulting in a -0.0041 drop year-over-year. This is a negative trend and results in 0 points for this criterion. Over the last 20 years, Fastenal's Gross Margin has generally remained above the industry median, highlighting its strong operational efficiency. In 2023, despite the decrease, FAST's Gross Margin is still well above the industry median of 0.3023, demonstrating a competitive advantage even though there's a marginal dip compared to last year.

Asset Turnover Ratio is growing?

Asset turnover measures a company's efficiency in using its assets to generate sales revenue. High asset turnover indicates better performance.

The Asset Turnover ratio for Fastenal (FAST) has increased from 1.578 in 2022 to 1.6305 in 2023. This improvement demonstrates enhanced efficiency in deploying assets to generate revenue, thus warranting an additional 1 point in the Piotroski Score. Furthermore, looking at historical data, this uptick continues a pattern of fluctuations but suggests a positive trend towards optimized asset utilization.