DNOW INC. (DNOW): what the price requires

At today's price, DNOW INC. (DNOW) is priced for today's economics sustained for ~13.2 years. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-19 · Source: https://boothcheck.com/report/DNOW

Headline

FieldValue
TickerDNOW
CompanyDNOW INC.
Current price$13.11/sh
CompositionUpstream 62% / Midstream 21% / Gas Utilities 7% / Downstream and Industrial 10%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin today1.4%
Must persist for13.2y
Multiple paid69x operating income

Solve inputs: computed at a 9.7% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~2.3 years.

How unusual the bet is: high

ReferenceValue
vs own history+0.27σ
cohort percentile (of 225 peers)96
sustained it ~10 years at this level14%
implied end-window share0%

Valuation X-Ray

The price is supported by asset-based and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset1.20x2expensive
Earnings—0—
Relative0.29x3justifies
Growth1.09x4expensive

Families that justify the price: Asset, Relative, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.0%); the inversion above states its own rate.

Per-Model Detail (n=9)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$8.591.53xyesFCF base $0.1B, growth 25% (input: historical growth), terminal g 4.0%, WACC 8.0%, 7yr projection
DCF Exit MultipleGrowth$11.241.17xyesExit EV/EBITDA: 35.8x / 38.8x / 41.8x (bear / base = today's held flat / bull), 7yr
Relative ValuationRelative$45.810.29xyesP/S fallback (negative EPS): Sector P/S 2.5x × TTM revenue — excluded from consensus
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$11.511.14xyesBook value floor: BV/sh $11.51, ROE negative
Two-Stage Excess ReturnAsset$10.361.26xyesBook value with convergence: BV/sh $11.51, ROE converges to ke
Discounted Future Market CapGrowth$12.861.02xyesRev $3.4B, growth 30% (input: historical growth; tapered), Terminal P/S: 0.6x / 0.7x / 0.9x (bear / base = today's held flat / bull, cap 12x)
Peter Lynch Fair ValueRelative$0.00—noNegative/zero EPS — earnings-based value floored at $0
Margin TrajectoryGrowth$59.290.22xyesMargin ramp: -5% → 12% over 7yr, rev growth 30% (input: historical growth; tapered)
Earnings Power ValueEarnings$0.011310.50xyesNormalized EBIT (5y avg op income, one-time charges added back) $0.06B × (1−21%) / WACC 8.0% → EPV (no growth) (excluded from median)
Residual IncomeAsset——no—
Graham NumberAsset——no—
EV/EBITDA RelativeRelative$1.747.53xyesEBITDA $0.08B × sector EV/EBITDA 12.0x
FCF YieldEarnings$0.011310.50xyesFCF $53.0M / Kₑ 9.3% — zero-growth perpetuity (excluded from median)
SBC-Adj FCF YieldEarnings$0.011310.50xyesSBC-adj FCF $0.02B (FCF $0.05B − SBC $0.03B) capitalized at Kₑ (excluded from median)
Ben Graham FormulaEarnings——no—
ROIC-Justified P/BAsset——no—
P/Sales SectorRelative$45.810.29xyesRevenue $3.40B × sector P/S 2.5x
PEG Fair ValueRelative——no—
Earnings YieldEarnings——no—
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$484.0m
Net debt / NOPAT (after-tax)13.92x
Net debt / operating income (pre-tax)11.00x
Share count CAGR (dilution)13.8%
Burning cashno

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

DNOW just doubled in size by acquiring MRC Global, which closed in November 2025, so the trailing numbers describe a company mid-integration rather than its steady state. First-quarter revenue nearly doubled to $1.18 billion, but a GAAP loss reflected merger charges, not operating decline.

The trailing operating loss of about $172 million is distorted by merger-related inventory step-up and integration costs; free cash flow is still positive at about $53 million and book value is about $11.51 a share, just below the $13.50 price.

The stock is a value-and-asset-supported name in transition. Full-year 2026 revenue is guided near $5 billion with EBITDA margin approaching 4.5%, and synergies are running ahead of plan. The main risk is that demand tracks oil and gas capital spending.

Bull Case

The right frame for DNOW today is that it is a company mid-transformation, and reading its trailing financials as a steady state badly understates it. DNOW distributes pipe, valves, fittings, and related energy products, and in November 2025 it closed the acquisition of MRC Global, a deal that effectively doubled its size. So the first-quarter 2026 numbers are not the picture of a struggling business; they are the picture of two companies being stitched together. Revenue nearly doubled year over year to $1.18 billion, up about 97%, almost entirely from the merger. The reported loss was driven by integration mechanics, including roughly $41 million of inventory step-up amortization, not by the underlying distribution operation, which generated positive adjusted income and positive free cash flow of about $53 million.

Once you see it as a scaled-up distributor in integration, the value case comes into focus. The combined company has stronger purchasing power, a broader product range, and improved competitive positioning in attractive end markets. Management raised first-year cost synergies to about $30 million from an initial $17 million target while keeping the three-year goal at $70 million, so the integration is delivering ahead of plan. Full-year 2026 revenue is guided toward $5 billion with EBITDA margins expected near 4.5% as temporary stabilization costs moderate. The balance sheet is workable, with about $600 million of gross debt against a larger combined cash-generating base.

The growth angle is where the bull case gets interesting. DNOW is leaning into the parts of energy that are growing structurally rather than cyclically: midstream, gas utilities, and increasingly data centers. Natural-gas infrastructure spending driven by rising power demand and LNG exports plays directly to its product set, and management expects data-center-related orders to exceed $30 million this year. At about $13.50, just above a roughly $11.51 book value, the price is supported by asset, relative-multiple, and growth-DCF frames, which is why the priced-in read is value-and-asset supported rather than a growth gamble. Analysts carry a Strong Buy consensus with targets around $16 to $17. The thesis is a larger, more diversified distributor whose normalized earnings, once the merger noise clears, justify a higher price.

Bear Case

The external variable with the most leverage on DNOW is energy capital spending, and the current price does not obviously discount a downturn in it. DNOW sells the pipe, valves, and fittings that producers, midstream operators, and utilities buy when they build and maintain infrastructure. That demand is downstream of the oil and gas capital budget, which swings with commodity prices and with drilling activity. The composition is roughly 62% upstream, the most cyclical slice, so a fall in oil prices or a pullback in drilling would hit the largest part of the business directly. A distributor with thin margins, guided near 4.5% EBITDA, has little cushion when volumes soften, and the macro backdrop for upstream activity is not within the company's control.

The second pressure is the integration itself, which is proving harder than hoped. The most significant near-term overhang is the harmonization of MRC Global's U.S. ERP systems onto SAP, which management described as a heavier lift than anticipated, and MRC Global's U.S. revenues declined most in upstream and downstream precisely because of those ERP-related disruptions. A botched or prolonged systems migration in a distribution business, where inventory and order accuracy are everything, can cost real revenue and customer trust, and the first-quarter adjusted EPS miss already prompted a share-price drop. Mergers that double a company's size carry execution risk that does not fully resolve for years.

The valuation reflects a business whose normalized earnings are still uncertain. The price rests on a roughly $11.51 book-value floor plus an assumption that post-integration margins reach the guided level. The composite read is elevated, with the inversion implying a long duration of sustained cash flow to justify the price. The bet at $13.50 (June 27, 2026) is that the merger delivers its synergies, the ERP migration finishes cleanly, and energy capital spending holds up, three conditions that all have to go right, and any one slipping would expose how little earnings currently sit beneath the price.

Valuation

DNOW is hard to value cleanly right now because the MRC Global merger distorts the trailing financials. The composite read is elevated on that basis.

The model X-ray leans on the methods that survive a negative-earnings year. The asset-based book-value floors land near $11.51, just below the $13.50 price, and the convergence variant near $10. The growth methods that credit a recovery land above the price: the perpetual-growth DCF near $8.51 but the future-market-cap projection near $13.25 and a margin-ramp model that assumes normalization much higher. The relative methods split, with the price-to-sales fallback high because it values a large revenue line with no margin, and EV/EBITDA low on depressed trailing EBITDA. The honest center is the book-value floor plus a judgment about normalized margins.

The pattern is a value-and-asset-supported distributor in transition. The price sits modestly above book value, so the downside cushion is the asset base, and the upside depends on the combined company reaching its guided 4.5% EBITDA margin once the integration noise clears. The bet at $13.50 is that normalized post-merger earnings justify a price above book, not that the current trailing financials, which are distorted by one-time merger charges, do. Analysts at a Strong Buy with targets near $16 are underwriting the normalization; the methods say the floor is the book value and the rest is execution.

Catalysts

The defining recent event is the MRC Global merger, completed in November 2025, with each MRC Global share converted into 0.9489 DNOW shares, roughly doubling the company. First-quarter 2026 results, reported in the spring, showed revenue up about 97% to $1.18 billion but a GAAP net loss of about $44 million driven by roughly $41 million of merger-related inventory step-up amortization and integration costs; adjusted net income was about $3 million. Shares fell on the adjusted EPS miss. Management raised first-year cost synergies to about $30 million from an initial target while keeping the three-year goal at $70 million.

The forward catalysts center on integration and end-market mix. The largest near-term item is the ERP harmonization of MRC Global's U.S. operations onto SAP, which has run slower than planned and is the main swing factor for revenue and margin recovery. Full-year 2026 revenue is guided near $5 billion with EBITDA margin approaching 4.5%. On the growth side, the company is prioritizing midstream, gas utilities, and data centers, with natural-gas infrastructure demand and data-center orders expected to exceed $30 million this year. The watch items are the pace and completion of the ERP migration, synergy capture against the $70 million target, post-integration EBITDA margin progression, and the direction of oil and gas capital spending that drives distribution volumes.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

View the full interactive DNOW report on boothcheck