Fastenal (NASDAQ: FAST) and NOW (NYSE:DNOW) are both retail/wholesale companies, but which is the better investment? We will contrast the two companies based on the strength of their profitability, institutional ownership, earnings, risk, analyst recommendations, valuation and dividends.

Valuation & Earnings

This table compares Fastenal and NOW’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Fastenal $4.13 billion 2.96 $952.46 million $1.82 23.34
NOW $2.34 billion 0.55 -$81.00 million ($1.56) -7.60

Fastenal has higher revenue and earnings than NOW. NOW is trading at a lower price-to-earnings ratio than Fastenal, indicating that it is currently the more affordable of the two stocks.

Dividends

Fastenal pays an annual dividend of $1.28 per share and has a dividend yield of 3.0%. NOW does not pay a dividend. Fastenal pays out 70.3% of its earnings in the form of a dividend. Fastenal has increased its dividend for 6 consecutive years.

Profitability

This table compares Fastenal and NOW’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Fastenal 12.71% 26.86% 19.02%
NOW -7.14% -7.83% -5.63%

Volatility & Risk

Fastenal has a beta of 0.99, indicating that its stock price is 1% less volatile than the S&P 500. Comparatively, NOW has a beta of 0.8, indicating that its stock price is 20% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current recommendations and price targets for Fastenal and NOW, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Fastenal 0 5 9 1 2.73
NOW 0 4 5 0 2.56

Fastenal presently has a consensus price target of $50.50, suggesting a potential upside of 18.88%. NOW has a consensus price target of $19.33, suggesting a potential upside of 63.01%. Given NOW’s higher possible upside, analysts plainly believe NOW is more favorable than Fastenal.

Insider & Institutional Ownership

83.0% of Fastenal shares are held by institutional investors. Comparatively, 96.7% of NOW shares are held by institutional investors. 0.6% of Fastenal shares are held by insiders. Comparatively, 3.3% of NOW shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Summary

Fastenal beats NOW on 13 of the 17 factors compared between the two stocks.

Fastenal Company Profile

Fastenal Company is engaged in wholesale distribution of industrial and construction supplies. The Company is engaged in fastener distribution, and non-fastener maintenance and supply business. As of December 31, 2016, it distributed these supplies through a network of approximately 2,500 stores. Its customers are in the manufacturing and non-residential construction markets. The manufacturing market includes both original equipment manufacturers (OEM) and maintenance, repair, and operations (MRO). The non-residential construction market includes general, electrical, plumbing, sheet metal and road contractors. Other users of its products include farmers, truckers, railroads, oil exploration, production and refinement companies, mining companies, federal, state, and local governmental entities, schools and certain retail trades. Its original product offerings are fasteners and other industrial and construction supplies, many of which are sold under the Fastenal product name.

NOW Company Profile

NOW Inc. (NOW) is a global distributor to the oil and gas and industrial markets. The Company operates under the DistributionNOW and Wilson Export brands. Its segments include the United States, Canada and International. As of December 31, 2016, its segments, the United States, Canada and International, had over 200, 55 and 35 locations, respectively. The United States segment comprises United States Energy, United States Supply Chain and United States Process Solutions. NOW’s energy product offerings are used in the oil and gas industry, including upstream drilling and completion, exploration and production, midstream infrastructure development and downstream petroleum refining, as well as in other industries, such as chemical processing, power generation and industrial manufacturing operations. It provides supply chain management to drilling contractors, exploration and production (E&P) operators, midstream operators, downstream energy and industrial manufacturing companies.

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