It’s been 45 days since the bombing started in Iran. The Strait of Hormuz remains closed. Oil prices are falling on the hope that the U.S. blockade of the Strait will prompt renewed permanent peace talks between the U.S. 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 trading at 6,886.24, up a little over 1%. The index is now in positive territory relative to its closing price 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 were up slightly pre-market.
I’m not an expert on the oil and gas business (not even close), but something tells me we haven’t seen the last of $100+ oil prices, which means you might tread carefully until ships are moving through the Strait in significant numbers.
Monday’s bearish price surprises saw Fastenal (FAST) stock lose nearly 7% after reporting Q1 2026 results. Its standard deviation of -3.07 was the fifth-worst.
Meanwhile, the Barchart Technical Opinion says FAST is a 40% near-term buy. However, its valuation suggests it’s maxed out its gains in 2026.
The stock looks spent. If you’ve profited from its move in 2026, it might be time to take profits. Here’s why.
The S&P 500 Dividend Aristocrats Index added the industrial and construction supplies wholesaler in January 2024 — an index constituent that has increased its annual dividend payment for 25 or more consecutive years — after it met the minimum criteria by raising its February 2024 payment by 2.6%.
It has subsequently raised its dividend three times; the latest increase of 9.1% saw the February 2026 payment rise to $0.24 a share from $0.22. The annual rate of $0.96 yields a reasonable 2.1%, nearly double the index average.
It’s been a darling of income investors for some time. The stock’s total return over the past 15 years is 13.36%. While that looks good, it’s about the same as the SPDR S&P 500 ETF Trust (SPY) at 13.65%.
Risk-adjusted, it probably hasn’t fully delivered for shareholders.
Despite yesterday’s setback, Fastenal’s stock is up over 14% in 2026. The main explanation for this would be healthy sales growth in recent quarters.
Yesterday, it reported Q1 2026 sales growth of 12.4% to $2.2 billion. In January, it reported 2025 sales of $2.03 billion, up 11.1% from 2024. However, the first quarter sales only met analyst expectations. The same can be said for earnings per share at $0.30, up 13.6% year-over-year.
In the past five years, it has grown its top-line sales in the first quarter every 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 strong quarter for the company. On an annual basis, its CAGR is 7.7%, which is also reasonably healthy.
Given its most recent reports, investors were expecting a bit more from the company’s guidance. However, its outlook wasn’t terrible. It expects 2026 sales to be $9.06 billion, a 10.5% increase, and an 8.5% rise in 2027. Therein lies the pain point.
According to S&P Global Market Intelligence, Fastenal’s 2026 and 2027 earnings per share estimates are $1.24 and $1.37, respectively. Based on its current share price, that’s forward P/E’s of 36.9x for 2026 and 33.4x for 2027.
That’s a nosebleed valuation. The only time since 2000 that it’s been higher is last August when FAST hit an all-time high of $50.63.
Admittedly, Fastenal converts its net income to operating cash at an excellent rate.
In Q1 2026, it converted $1 of earnings into $1.11 in operating cash flow. In the trailing 12 months ended March 31, its operating cash flow was $1.41 billion, 28% higher than $1.10 billion in the same period a year earlier.
Its free cash flow over the 12 months increased by 34% to $1.16 billion from $869 million. However, this year it expects capital expenditures to be higher than usual at $320 million, up from $245 million in 2025.
About the only time its annual free cash flow has been higher was in 2023. So, from that perspective, investors might 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 under 4% to be overvalued.
I can see why only 6 of 16 analysts rate it a Buy (3.25 out of 5), with a target price that’s only a dollar above its current price.
It’s not that it’s a bad stock; it’s just very expensive.
On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
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