Fastenal: Potential Long-Term Portfolio Addition
Mar. 8, 2018 11:28 AM•FAST
Summary
Solid increases in revenue and earnings expected.
Returns to shareholders likely to continue.
Moving to a model that requires less tangible assets.
Steady returns likely for the foreseeable future.
Fastenal Company (FAST) began with a marketing strategy of supplying threaded fasteners to customers in small, medium-sized, and, in subsequent years, large cities. Over time, that mandate has expanded to a broader range of industrial and construction. The large majority of its transactions are business-to-business, though we also have some walk-in retail business. At the end of 2017, it had 2,988 in-market locations (defined in the table below) in 24 countries supported by 14 distribution centers in North America.
In recent years, it has developed additional models that get the company closer to the customer, including vending, bin stocks, and Onsite locations. It currently has several versions of selling locations: (1) a traditional (or public) branch' services, (2) an 'overseas branch', (3) a 'strategic account branch, (4) a 'strategic account site', and (5) an 'Onsite location'.
Onsite location is similar to that of a branch, but this model is also beginning to represent a meaningful portion of the company's total revenue, and it expects that share to grow materially over time. As a result, we have begun to refer to our network in terms of in-market locations, which includes our total branches and Onsite locations, and we began to refer to strategic account sites as non-in-market locations. Onsite locations are key to Fastenal's growth. The proximity to customers is a competitive advantage that will not easily be overcome by online or even local competitors.
Fastenal: Potential Long-Term Portfolio Addition - Fastenal Company (NASDAQ:FAST) | Seeking Alpha
