Fastenal Stock Pulls Back in October—Is It Time to Buy FAST?

Key Points

• Fastenal pulled back after its Q3 release, but will likely rebound quickly as analysts and institutional trends suggest they will buy this dip.
• Results failed to impress but were not weak, revealing that this high-quality company is growing and widening its margin.
• Dividends are attractive, growing robustly, and are reliable for 2026.

Fastenal Company NASDAQ: FAST stock is pulling back in October, and the Q3 results aren’t helping with support. However, the problem isn’t with growth, profitability, or capital returns so much as valuation and analysts' sentiment, which are likely to be passing issues.

With shares trading at 42x this year’s earnings and recent results falling short of consensus, there’s little immediate incentive for the market to buy in mid-October. However, that dynamic is likely to shift as catalysts play out and sentiment improves over time.

Not only is this company growing in the face of macroeconomic headwinds, but it is also widening its margin, set up to improve its valuation and sustain its stock price uptrend over the long term. 

Fastenal’s High-Valuation Isn’t Undeserved

Fastenal’s Q3 results failed to impress the market but still highlight the quality of its operations. The company grew revenue by 11.5%, which is in line with MarketBeat’s consensus analyst estimate and is driven by an increase in client count and location penetration.

The company reported increased unit sales, with strength across client sizes, particularly in larger businesses. Segmentally, the core fastener segment was strongest, gaining 14.4%, while Safety and Other grew by 9.8% and 10.7%, respectively.

Breaking it down by end-market, manufacturing was strongest, up 12.7%, followed by 7.5% and 8.9% increases in non-residential construction and Other, with no reason to expect weaknesses to emerge in Q4.

The margin news is also bullish. The company experienced margin pressures, but price increases, product mix, sales leverage, and operational improvement offset them, leaving the gross and operating margins up by 40 basis points each.

The net result is that operating and net income grew at leveraged rates, with net up 12.6% and GAAP EPS up 12.3%. A higher share count impacted GAAP EPS. Fastenal has an existing repurchase authorization but did not buy shares in Q3. 

Fastenal’s cash flow and balance sheet also reflect its high-quality operations. Balance sheet highlights at the end of Q3 include increased cash, receivables, and inventory, as well as current and total assets sufficient to offset liabilities and improve shareholder equity.

The quarterly cash flow was positive, long-term debt declined, and leverage remains ultra-low. The company’s total liabilities are less than 0.35x its equity, leaving it in a fortress-like condition capable of sustaining its growth while paying dividends. 

Fastenal Is Growing Its Dividend Quickly

Fastenal’s dividend is attractive for numerous reasons, including its yield, safety, and distribution growth. The stock yields approximately 2.0% after its October price plunge and has been increasing its annual distribution at a double-digit CAGR for years.

The payout ratio is on the high side at nearly 80%, but this isn’t a red flag given the earnings growth outlook and balance sheet health. The company has virtually no long-term debt, leaving its cash flow unimpeded and available for distribution.

While the dividend growth CAGR may slow in the coming years, it is unlikely that Fastenal will stop increasing its dividend and give up its recently acquired Dividend Aristocrat status. 

Analysts and institutional trends suggest that these groups will buy Fastenal stock on the dip. The analyst trends include increased coverage, a solid support base with 15 tracked by MarketBeat, and a rising price target. Institutional trends are likely bullish, with them owning about 80% and buying on balance in 2025.

The caveat is that the Q3 release may not inspire bullish revisions to analysts' forecasts, including the stock price target, which may cap the market until better news emerges. That could begin as soon as the upcoming quarter, when FOMC interest rate cuts are expected to start impacting industrial activity globally.