Fastenal CompanyFASTNASDAQ

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DCF Valuation

DCF Valuation Summary

Strong Sell

Fair Value: $25.67 per share(market-calibrated)

-44.6%

Upside to Fair Value

Current

$46.33

Pure Model

$24.20

Fair Value

$25.67

Bull Case

$28.94

Bear Case

$19.91

Market Reality Check

Model Terminal Growth

2.25%

Market-Implied Growth

6.98%

Calibrated Growth

3.43%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $24.20.

What's Driving This Ratingfor FAST

✓

CapEx already efficient

CapEx at 2.38% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

✓

Premium margins already priced in

EBIT margin of 20.43% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.

⚠

Analyst growth decelerates sharply

Revenue growth drops from 9.75% in Year 1 to 2.25% by Year 5 (per analyst consensus). This growth deceleration is a key reason the model may undervalue the stock if growth re-accelerates.

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $20.24/share (16.6x terminal FCF) while exit multiple gives $28.16/share (27.8x terminal FCF). The 18x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 2.25% growth is more conservative. The base case averages both methods.

🎯

Market pricing in higher long-term growth

To justify $46.33, the market implies 6.98% perpetual growth — 473bps above the model's 2.25%. This suggests the market sees additional growth catalysts (AI, new products, market expansion) not captured in analyst estimates.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 64.86% indicates efficient cash generation. FCF reaches $1.8B by Year 10 (14.64% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.89

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)8.48%

Cost of Debt

Pre-tax Cost of Debt2.19%

Tax Rate23.96%

After-tax Cost of Debt1.66%

Equity Weight (E/V)99.18%

Debt Weight (D/V)0.82%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (99.18% × 8.48%) + (0.82% × 1.66%)

= 8.43%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$9.0B	$10.3B	$11.1B	$11.6B	$12.4B
EBIT	$1.8B	$2.1B	$2.3B	$2.4B	$2.5B
Tax	$441M	$503M	$545M	$570M	$609M
NOPAT	$1.4B	$1.6B	$1.7B	$1.8B	$1.9B
+ Depreciation	$193M	$220M	$239M	$249M	$267M
- Capex	$214M	$244M	$265M	$277M	$296M
- Δ NWC	$240M	$159M	$73M	$77M	$82M
Free Cash Flow	$1.1B	$1.4B	$1.6B	$1.7B	$1.8B
Discount Factor	0.922	0.785	0.667	0.568	0.445
Present Value	$1.0B	$1.1B	$1.1B	$967M	$811M

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$1.8B

Terminal Growth Rate2.25%

WACC8.43%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$30.1B

PV of Terminal Value$13.4B

Exit Multiple Method

Year 10 EBITDA$2.8B

Exit Multiple (EV/EBITDA)18.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$50.5B

PV of Terminal Value$22.5B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$10.0B

PV of Terminal Value$13.4B

Enterprise Value$23.4B

(-) Net Debt$165M

Equity Value$23.2B

Shares Outstanding1.1B

Price per Share$20.24

Exit Multiple Method

PV of Projected FCFs$10.0B

PV of Terminal Value$22.5B

Enterprise Value$32.5B

(-) Net Debt$165M

Equity Value$32.3B

Shares Outstanding1.1B

Price per Share$28.16

Pure Model Fair Value

$24.20

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.25%	1.75%	2.25%	2.75%	3.25%
6.43%	$29.59	$30.52	$31.68	$33.16	$35.10
7.43%	$26.09	$26.69	$27.39	$28.25	$29.32
8.43%	$23.33	$23.73	$24.20	$24.75	$25.40
9.43%	$21.08	$21.36	$21.68	$22.04	$22.47
10.43%	$19.18	$19.38	$19.61	$19.87	$20.16

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$19.91

-57.0% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.11

Base Case

$24.20

-47.8% vs current

• Analyst consensus
• Terminal growth: 2.3%
• Beta: 0.89

Bull Case

$28.94

-37.5% vs current

• +25% vs analyst consensus
• Terminal growth: 2.8%
• Beta: 0.75

Key Assumptions & Drivers• Industrials Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth9.75%

Year 3 Revenue Growth5.43%

Year 5 Revenue Growth2.25%

Year 7 Revenue Growth2.25%

Year 10 Revenue Growth2.25%

Terminal Growth Rate2.25%

Margin & Efficiency

Current EBIT Margin20.43%

Tax Rate23.96%

Historical Capex / Rev2.38%

NWC / Revenue30.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 18x EV/EBITDA (Industrials sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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