Fastenal Stock Buckles Up Ahead of Earnings

Fastenal reports earning on October 12 before the open

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Industrial machinery stock Fastenal Company (NASDAQ:FAST) is up 2.1% to trade at $53.09 today, three days from the company's earnings report, due out Tuesday Oct. 12 before the open. Ahead of the event, put traders have been piling on. 

Fastenal stock's last four quarterly reports have yielded negative post-earnings reactions, including a 4.8% bear gap last October. Overall, FAST averages a post-earnings move of 4.6% the last eight quarters, regardless of direction. This time around, the options market is pricing in a slightly larger post-earnings move of 5.4%. 

Fastenal stock is up 8.7% year-to-date, but its recent slide from an Aug. 21 record high of $56.39 has been caught by its 200-day moving average. Should the stock score a positive post-earnings pop next Tuesday, it should sway analysts, considering 9 of 11 brokerages in coverage maintain "hold" or "strong sell" ratings. 

FAST Stock Chart

From a fundamental point of view, Fastenal has remained very consistent over the last couple of years, growing its top- and bottom-lines on an annual basis. FAST’s revenues have increased 30% and net income is up 50% since fiscal 2017. Moreover, Fastenal Company offers a forward dividend of $1.12 and a dividend yield of 2.17%.

However, Fastenal’s biggest issue seems to be its valuation, with its market cap coming in at nearly $30 billion. At the moment, FAST trades at a very high price-earnings ratio of 34.66 and has forward price-earnings ratio 29.94, meaning it is more likely for Fastenal stock to decrease in the short-term or flat-line over the coming years than it is for FAST to continue growing.

It's also worth pointing out that FAST ranks low on the Schaeffer's Volatility Scorecard (SVS), with a score of just 17 out of 100. In other words, the security has consistently realized lower volatility expectations than its options have priced in, making the stock a potential premium-selling candidate.

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