Episode Details

Fastenal Company (FAST) Q2 2026 — Fastenal grew Q2 2026 revenue 14.7% to $2.39B with daily sales up 14.7%, but EPS of $0.33 only met consensus, gross margin fell 75bps to 44.6% on tariff costs, and it trimmed two full-year targets. The stock slipped ~2.2% to ~$44.75. Nobody disputes Fastenal is a wonderful business — 31% return on capital, a genuine vending-machine and Onsite moat, a fortress balance sheet, and a growing dividend. The question is the price. At ~34x forward earnings for what's really a ~10% compounder (about 290bps of the 14.7% growth was tariff pricing, not volume), even a generous owner-earnings DCF lands around $42 — below the $44.75 price and below the Street's $47.67 average. Margins are squeezed by tariffs with no recovery guided for H2, and the CEO handed off to a successor two days after the print. A wonderful business at a full price. THE CALL: HOLD (3/5, A WONDERFUL BUSINESS AT A FULL PRICE) — base-case value ~$42 vs ~$44.75 today. What to watch: price-cost (margin) turning positive as tariffs settle, the digital-footprint mix re-accelerating past the trimmed target, and the CEO transition from Florness to Watts Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.