The largest wholesale distribution industries include motor parts, commercial equipment, electronics, petroleum products, groceries and pharmaceuticals. Some notable electronics distributors are Sonepar SA, WESCO, Rexel and Graybar. McLane, Core-Mark, H.T Hackney Company and Eby Brown are prominent wholesalers serving grocery stores. AmerisourceBergen, Cardinal Health and McKesson are the three largest pharmaceutical wholesale distribution firms in the United States.
Wholesalers occupy an important node in the supply chain, connecting producers to retailers. As an intermediary, wholesale distributors create value through quality logistics and the breadth of their supplier and retailer networks. Metrics used to assess wholesale operations measure profitability, inventory efficiency and growth. Because wholesalers are usually large, mature and stable, analysts frequently base valuation on earnings and dividend metrics.
Wholesalers share some key performance indicators (KPIs) with other types of businesses, though relevant KPIs must reflect certain specific characteristics of the business being analyzed. Most distributors have a relatively small number of large clients. As mature companies, their revenue growth rates approach that of the gross domestic product (GDP). Their margins tend to be relatively narrow. Revenue growth, gross margin stability, net profit margin levels, return on assets (ROA) and return on equity (ROE) are all operational metrics that apply to wholesalers. Efficiency ratios are especially important for distributors. Inventory turnover, receivable turnover, inventory carrying costs and sales order fill rates all track how efficiently resale operations are being conducted.
Investors also use valuation ratios to determine if a stock is priceworthy. Wholesale businesses are usually large, mature companies and are generally profitable. Forward price to earnings (P/E) ratio, price to free cash flow and dividend yield are important valuation metrics for this type of firm.