If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Ergo, when we looked at the ROCE trends at Fastenal (NASDAQ:FAST), we liked what we saw.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Return On Capital Employed (ROCE): What Is It?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Fastenal:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.37 = US$1.5b ÷ (US$4.9b - US$785m) (Based on the trailing twelve months to March 2025).

So, Fastenal has an ROCE of 37%.  That's a fantastic return and not only that, it outpaces the average of 11% earned by companies in a similar industry.

View our latest analysis for Fastenal NasdaqGS:FAST Return on Capital Employed May 9th 2025

Above you can see how the current ROCE for Fastenal compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our freeanalyst report for Fastenal .

The Trend Of ROCE

We'd be pretty happy with returns on capital like Fastenal. The company has consistently earned 37% for the last five years, and the capital employed within the business has risen 22% in that time. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. If Fastenal can keep this up, we'd be very optimistic about its future.

In Conclusion...

In summary, we're delighted to see that Fastenal has been compounding returns by reinvesting at consistently high rates of return, as these are common traits of a multi-bagger. And the stock has done incredibly well with a 133% return over the last five years, so long term investors are no doubt ecstatic with that result. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

Fastenal does have some risks though, and we've spotted  1 warning sign for Fastenal that you might be interested in.

Story Continues

If you'd like to see other companies earning high returns, check out our freelist of companies earning high returns with solid balance sheets here.

Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

View Comments