Rexel Plugged Into Improving Trends

Distribution is a tough business, and Amazon's (AMZN) entry into industrial distribution has not made life any easier for companies like Grainger (GWW), Fastenal (FAST), Rexel (OTCPK:RXEEY), or WESCO (WCC). Even so, I think there's a worthwhile opportunity in Rexel today, as the market seems to be overestimating the threat from Amazon, and underestimating the benefits to be had from an improving construction market in Europe, self-directed internal improvements, and the benefits to be had from further consolidation.

I don't expect torrid revenue growth from Rexel, but I do expect some growth and improving margins to drive more compelling FCF growth, as new management responds to an activist investor's involvement with far-ranging self-improvement initiatives. With around 20% to 25% upside from here, Rexel looks well worth considering.

Rexel's ADRs are not liquid, and that is a shame. Investors can nevertheless look to the Paris-listed shares (RXL.PA) which have far more liquidity and which are available through many larger brokerages.

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Rexel Plugged Into Improving Trends