Fastenal Vs Grainger

The question is: Do I invest in the company Fastenal or the company Grainger? Fastenal, a company based out of Winona, Minnesota, supplies items such as fasteners and tools to manufacturers. The company owns 2,622 stores, 20,746 employees. The company was named, the top-performing stock in the Russell 1000 index over a recent 25-year period by Bloomberg Business week. It was also ranked #44 by Forbes in their list of American’s 100 Most Innovative Companies. The company is focused on customer relationships and satisfaction and its motto is “Growth Through Customer Service. Grainger, a company based out of Lake Forest, IL, also assists manufacturers with supply needs. The company also assists with inventory control and supply ordering.
The following are some ratios and what exactly they mean. The Current ratio for Fastener is 4.46, while for Grainger it is only 1.7. The Current ratio is important because it give a good snapshot of a company’s current health. It helps an investor see a company’s capability to turn its assets liquid and pay its debt (current assets/current liabilities). The lower the ratio, means the slower the company is paying its debt. Fastener has a much more favorable ratio than Grainger. Two other ratios that goes hand in hand with the Current ratio is the Accounts Receivable Turnover ratio and the Number of Days in Accounts Receivable ratios. These ratios tell how a well and how fast a company is at collecting the credit it extends to its customers. Even though these ratios need to be analyzed over time, they give a glimpse into current practices. Grainger and Fastener perform at about the same pace with Grainger’s ratio at 8.37 and Fastenal at 8.32. This ratio tells us that both companies are collecting on average 8 times a year, or every month and a half which is respectable. Their number of days in AR are both 45 which is a common amount of time. Finally, a Cash to Cash Cycle ratio determines how fast a company can take case, convert it to inventory and then selling it, turning it back into cash. I feel
To know how well a company uses its assets to generate money, the Return on Assets (ROA) ratio or Return on Investments (ROI) is most effective. With a slightly higher ratio of 0.29, Fastenal has the edger over Grainger (0.14). While Earnings per Share ratio is not a reliable ratio to use alone when making decisions because of the different ways earnings can be reported, it gives an idea of what each company is paying per one outstanding stock. This helps indicate profitability. Grainger pulls ahead her with 11.69 vs. Fastenal’s low 1.77. The Price / Earnings ratio works in conjunction with the EPS by telling us how much investors are willing to pay for the stock. Fastenal pulls ahead with $23.60 vs. Grainger’s