It has been 45 days since the bombings in Iran began. The Strait of Hormuz remains closed. Oil prices are falling on hopes that the US blockade of the Strait will spur new permanent peace talks between the US and Iran.
More importantly, more than six weeks of war have done little to dampen the spirits of bullish investors. The S&P 500 closed yesterday’s session at 6,886.24, a little more than 1%. The index is now in positive territory relative to its closing price on the day before the war began.
With oil prices back below $100, investors are likely to step up their buying on Tuesday. S&P 500 futures rose slightly premarket.
I’m not an expert in the oil and gas business (not even close), but something tells me we haven’t seen the latest oil prices over $100, which means we have to tread carefully until ships move through the Strait in significant quantities.
Monday’s bearish price surprises caused Fastenal (FAST) stock to lose nearly 7% after reporting first-quarter 2026 results. Its -3.07 standard deviation was the fifth-worst.
Meanwhile, Barchart Technical Opinion says FAST is a 40% Buy in the short term. However, its valuation suggests it has maximized its earnings in 2026.
The stock looks worn. If you have benefited from its move in 2026, it could be time to take profits. Here’s why.
The S&P 500 Dividend Aristocrats Index added industrial and construction supplies wholesaler in January 2024, an index component that has increased its annual dividend payout for 25 or more consecutive years, after it met minimum criteria by increasing its February 2024 payout by 2.6%.
It has subsequently increased its dividend three times; The latest 9.1% increase saw the February 2026 payout increase to $0.24 per share from $0.22. The annual rate of $0.96 yields a reasonable 2.1%, almost double the index average.
It has been a favorite of income investors for some time. The stock’s total return over the past 15 years is 13.36%. While it looks nice, it’s about the same as the SPDR S&P 500 ETF Trust (SPY) at 13.65%.
Adjusted for risk, it probably hasn’t quite delivered for shareholders.
Despite yesterday’s setback, Fastenal shares are up more than 14% in 2026. The main explanation for this would be the healthy sales growth in recent quarters.
Yesterday, it reported sales growth of 12.4% in the first quarter of 2026, up to $2.2 billion. In January, it reported 2025 sales of $2.03 billion, up 11.1% from 2024. However, first-quarter sales only met analyst expectations. The same can be said for earnings per share of $0.30, up 13.6% year over year.
Over the past five years, it has increased its top-line sales in the first quarter of each year from $1.42 billion in 2020 to $2.2 billion in 2025, a CAGR (compound annual growth rate) of 9.2%. It’s clearly a solid quarter for the company. Annually, its CAGR is 7.7%, which is also reasonably healthy.
Given its most recent reports, investors expected a little more from the company’s guidance. However, his outlook was not terrible. It expects sales in 2026 to be $9.06 billion, an increase of 10.5%, and an increase of 8.5% in 2027. Therein lies the problem.
According to S&P Global Market Intelligence, Fastenal’s earnings per share estimates for 2026 and 2027 are $1.24 and $1.37, respectively. Based on its current share price, that implies a forward P/E of 36.9 times for 2026 and 33.4 times for 2027.
That is a bloody assessment. The only time since 2000 it has been higher was last August, when FAST hit an all-time high of $50.63.
It’s true that Fastenal converts its net income into operating cash at an excellent rate.
In the first quarter of 2026, it turned $1 of profits into $1.11 of operating cash flow. In the trailing 12 months ended March 31, its operating cash flow was $1.41 billion, up 28% from $1.1 billion in the same period a year earlier.
Its free cash flow for the 12 months rose 34% to $1.16 billion from $869 million. However, this year it expects capital expenditures to be higher than usual: $320 million, up from $245 million in 2025.
About the only time its annual free cash flow was higher was in 2023. So, from that perspective, investors could give it a higher multiple, but not necessarily 37 times earnings.
Based on an enterprise value of $56.6 billion, Fastenal has a free cash flow yield of 2.1%. I consider anything less than 4% to be overrated.
I can see why only 6 out of 16 analysts rate it a Buy (3.25 out of 5), with a price target that’s just a dollar above its current price.
It’s not that it’s a bad action; It’s just too expensive.
On the date of publication, Will Ashworth had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com
