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TMFRich here is a response from BSCARTER

>>>The details of the DCF calculations weren't given by the poster so it is hard to verify for sure. But, if I understand the method employed it is a simplified method that, in the case of FAST, misses much of the intrinsic value of this company. I prefer my original posted valuation technique a few threads back to the one employed by this poster.<<<

I thought I explained my DCF very well. It was certainly quick and dirty, but it made the most sense out of the information available. The payout in 2005 & 2006 through both dividends and share buyback was 39% and during this time they were able to grow equity at 13% and 15% respectively. Using these assumptions and also assuming that ROE would remain stable (due to no changes in capital structure) I based my DCF from now until full NA saturation on a 40% payout of earnings (rounding up from the 39% in the past two years) after which ROIC would drop as it has with others when they transitioned from a mainly domestic retailer to a global one. To argue against this method would be to say that there was additional free cash that was stashed away somewhere (which I didn't see) or that they will be able to expand globally as easily as they have domestically, which I simply don't believe to be true.

>>>With all that said, I'm going to admit that FAST is no screaming bargain in a Ben Graham sense. But, FAST is without question a wonderful company and I think even at the current quotation is fairly priced. As Buffett has said, “It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”<<<

Well I certainly agree with him on his first sentence and I also agree that FAST is a wonderful company, however I don't believe that it is fairly priced. It doesn't seem that the market agrees with me right now based on recent performance of the stock, but then again the market doesn't look very far down the road either and the cyclical market for their products has been at peak level lately. There is always the chance that management decides to employ leverage to increase the FCF sometime in the future, but that would also be balanced to some extent by the fact that you would naturally want to use a higher discount rate in the valuation of a company using leverage vs. one that doesn't. Right now it seems that Mr. Market is very much in love with the FAST story and believes that it will somehow become the SBUX of construction fasteners with a store in every village of the world. If I had to make an investment in them right now I'd have to say the short side looks much more attractive.
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