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Investing.com - Raymond James has reiterated its Underperform rating on Fastenal (NASDAQ:FAST), citing concerns about the company’s valuation despite solid performance. According to InvestingPro data, the stock trades at a P/E ratio of 46x and an EV/EBITDA multiple of 31.7x, supporting Raymond James’ valuation concerns.
The firm noted that Fastenal’s August average daily sales (ADS) aligned with expectations, though the stock’s reaction suggested investors had anticipated acceleration compared to July’s figures.
August represented the first below-seasonal monthly performance since April, with growth approximately 100 basis points lower year-over-year compared to July’s results.
Raymond James acknowledged that Fastenal is "performing well in a challenging environment," with improved outgrowth against industrial production and PPI through July, the latest data available.
Despite these positive indicators, the firm expressed concern about what it called "an asymmetrically negative setup," pointing to market expectations for "essentially perpetual double-digit sales growth" and a valuation "well above even FAST’s historical range." InvestingPro analysis indicates the stock is currently overvalued, with 16 additional key insights available to subscribers, including detailed valuation metrics and growth forecasts.
In other recent news, Fastenal reported strong second-quarter earnings, with earnings per share of $0.29, exceeding the consensus forecast of $0.28. The company’s revenue reached $2.08 billion, slightly surpassing expectations. BofA Securities raised its price target for Fastenal to $49.00 from $42.50 while maintaining a Buy rating, following the positive earnings report. Fastenal’s performance also led Baird to upgrade its rating from Neutral to Outperform, citing expectations of accelerating growth.
JPMorgan increased its price target to $41.00, maintaining a Neutral rating, and noted the company’s better-than-anticipated gross margins. UBS also kept its Neutral rating, acknowledging Fastenal’s accelerating sales growth, which reached 9.8% year over year. The company’s overall quarterly sales growth was reported at 8.6% year over year. These developments highlight Fastenal’s strategic changes and favorable cyclical setup, which have positioned the company for stronger performance.
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