W.W. Grainger (NYSE:GWW) versus Fastenal (NASDAQ:FAST) Critical Analysis

Fastenal (NASDAQ:FAST) and W.W. Grainger (NYSE:GWW) are both large-cap industrials companies, but which is the superior business? We will compare the two businesses based on the strength of their valuation, institutional ownership, dividends, risk, earnings, analyst recommendations and profitability.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Fastenal	15.45%	34.03%	26.16%
W.W. Grainger	9.92%	48.73%	22.40%

Insider & Institutional Ownership

81.4% of Fastenal shares are owned by institutional investors. Comparatively, 80.7% of W.W. Grainger shares are owned by institutional investors. 0.3% of Fastenal shares are owned by insiders. Comparatively, 6.3% of W.W. Grainger shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of recent ratings for Fastenal and W.W. Grainger, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Fastenal	2	5	5	0	2.25
W.W. Grainger	1	7	2	0	2.10

Fastenal currently has a consensus target price of $49.17, indicating a potential upside of 2.58%. W.W. Grainger has a consensus target price of $1,286.62, indicating a potential upside of 0.14%. Given Fastenal’s stronger consensus rating and higher probable upside, analysts clearly believe Fastenal is more favorable than W.W. Grainger.

Risk and Volatility

Fastenal has a beta of 0.72, meaning that its stock price is 28% less volatile than the S&P 500. Comparatively, W.W. Grainger has a beta of 1.03, meaning that its stock price is 3% more volatile than the S&P 500.

Dividends

Fastenal pays an annual dividend of $1.04 per share and has a dividend yield of 2.2%. W.W. Grainger pays an annual dividend of $9.96 per share and has a dividend yield of 0.8%. Fastenal pays out 88.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. W.W. Grainger pays out 25.4% of its earnings in the form of a dividend. Fastenal has raised its dividend for 26 consecutive years and W.W. Grainger has raised its dividend for 55 consecutive years.

Earnings & Valuation

This table compares Fastenal and W.W. Grainger”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Fastenal	$8.20 billion	6.71	$1.26 billion	$1.18	40.62
W.W. Grainger	$17.94 billion	3.37	$1.71 billion	$39.22	32.76

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

Summary

Fastenal beats W.W. Grainger on 9 of the 17 factors compared between the two stocks.

About Fastenal

Fastenal Company, together with its subsidiaries, engages in the wholesale distribution of industrial and construction supplies in the United States, Canada, Mexico, North America, and internationally. It offers fasteners, and related industrial and construction supplies under the Fastenal name. The company’s fastener products include threaded fasteners, bolts, nuts, screws, studs, and related washers that are used in manufactured products and construction projects, as well as in the maintenance and repair of machines. It also offers miscellaneous supplies and hardware, including pins, machinery keys, concrete anchors, metal framing systems, wire ropes, strut products, rivets, and related accessories. The company serves the manufacturing market comprising original equipment manufacturers; maintenance, repair, and operations customers; non-residential construction market; farmers, truckers, railroads, mining companies, schools, and retail trades; and oil exploration, production, and refinement companies, as well as federal, state, and local governmental entities. Fastenal Company was founded in 1967 and is headquartered in Winona, Minnesota.

About W.W. Grainger

W.W. Grainger, Inc., together with its subsidiaries, distributes maintenance, repair, and operating products and services primarily in North America, Japan, the United Kingdom, and internationally. The company operates through two segments, High-Touch Solutions N.A. and Endless Assortment. The company provides safety, security, material handling and storage equipment, pumps and plumbing equipment, cleaning and maintenance, and metalworking and hand tools. It also offers technical support and inventory management services. The company serves smaller businesses to large corporations, government entities, and other institutions, as well as commercial, healthcare, and manufacturing industries through sales and service representatives, and electronic and ecommerce channels. W.W. Grainger, Inc. was founded in 1927 and is headquartered in Lake Forest, Illinois.