Assessing DNOW’s Valuation After New Analyst Coverage Highlights Synergies From the MRC Global Combination

DNOW (DNOW) just landed on more investors' radar after Texas Capital’s Matthew Key initiated coverage, highlighting the company’s combined scale with MRC Global and the potential cash flow boost from cost synergies and cross selling.

See our latest analysis for DNOW.

That call out comes on the back of a $13.69 share price that has delivered a solid 8.82 percent 1 month share price return and an impressive 5 year total shareholder return of almost 100 percent. This suggests long term momentum has been quietly building even through some recent quarterly pullbacks.

If this kind of industrial turnaround story has your attention, it is a good time to explore fast growing stocks with high insider ownership for other under the radar growth ideas with skin in the game.

With DNOW trading about 24 percent below consensus targets and boasting double digit revenue and earnings growth, the valuation story is getting harder to ignore. Is this still an overlooked opportunity, or is the market already pricing in its next leg of growth?

Most Popular Narrative: 19.5% Undervalued

With the narrative pointing to a fair value of $17 against DNOW's last close at $13.69, the gap hinges on aggressive growth and margin assumptions.

Focus on energy evolution sales, aiming to double in 2024, could improve revenue mix towards growing segments like carbon capture, utilization, and storage, and renewable natural gas, indicating potential for higher margins from specialized products and services that support new energy technologies.

Read the complete narrative.

Curious why a mature distributor is being valued like a high growth compounder? The narrative leans on rapid expansion, shifting profit mix, and richer future earnings multiples. Want to see the exact assumptions behind that optimism?

Result: Fair Value of $17 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent weakness in U.S. drilling activity and tougher competition squeezing steel-related margins could quickly undermine the growth and valuation thesis.

Find out about the key risks to this DNOW narrative.

Build Your Own DNOW Narrative

If you see the story differently or want to dive into the numbers yourself, you can shape a custom view in minutes with Do it your way.

A great starting point for your DNOW research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

Looking for more investment ideas?

Do not stop at a single opportunity, use the Simply Wall St Screener to uncover more focused ideas that match your style before the market catches on.

• Explore mispriced quality by reviewing these 914 undervalued stocks based on cash flows that may align with your objectives as cash flows develop over time.
• Find companies involved in innovation by targeting these 25 AI penny stocks that are connected to artificial intelligence adoption.
• Identify potential income streams by screening these 13 dividend stocks with yields > 3% that feature dividend yields together with sustainable payout profiles.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com