Time To Buy DNOW Stock?
Dnow Inc. (NYSE: DNOW), a leading supplier of energy and industrial products, is up 11% year-to-date, outpacing the S&P 500’s 5% gain. Investor interest has grown stronger following the company’s announcement of a $1.5 billion all-stock acquisition of energy infrastructure peer MRC Global Inc. (NYSE: MRC), a move that could reshape the energy supply chain space.
Under the agreement, MRC shareholders will receive 0.9489 shares of DNOW for each MRC share—an 8.5% premium to MRC’s 30-day volume-weighted average price of $12.77 as of June 25. Based on closing prices that day, the deal implies a combined enterprise value of approximately $3.0 billion. Once the merger closes, DNOW shareholders will own about 56.5% of the new company, with MRC investors holding the remaining 43.5%, on a fully diluted basis. This all-stock deal consolidates two major players in the energy infrastructure supply space, giving DNOW more scale, diversification, and bargaining power.
Despite the upbeat news, macroeconomic risks remain. WTI crude prices have slipped 5% YTD, trading around $67 per barrel, amid concerns that OPEC+ may boost supply by up to 411,000 barrels per day in August, adding to a 2025 increase of 1.78 million bpd (over 1.5% of global demand). Meanwhile, trade tensions are flaring again. U.S. Treasury Secretary Scott Bessent warned of potential tariffs as high as 50% resuming as early as July 9, reviving earlier proposed tariffs. These could dampen industrial and energy demand, important end markets for DNOW.
That said, investors seeking upside with lower volatility than a single stock might consider the Trefis High Quality portfolio, which has consistently outperformed the S&P 500, delivering a total return of over 91% since its inception. It offers diversified exposure to strong companies with steady performance, offering a smoother ride compared to the commodity‑driven volatility of DNOW.
How Does Dnow’s Valuation Look vs. The S&P 500?
Going by what you pay per dollar of sales or profit, DNOW stock looks cheap compared to the broader market.
• Dnow has a price-to-sales (P/S) ratio of 0.7 vs. a figure of 3.1 for the S&P 500
• Additionally, the company’s price-to-free cash flow (P/FCF) ratio is 8.4 compared to 20.9 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of 18.9 vs. the benchmark’s 26.9
How Have Dnow’s Revenues Grown Over Recent Years?
Dnow’s Revenues have seen some growth over recent years.
• Dnow has seen its top line grow at an average rate of 12.0% over the last 3 years (vs. increase of 5.5% for S&P 500)
• Its revenues have grown 4.7% from $2.3 Bil to $2.4 Bil in the last 12 months (vs. growth of 5.5% for S&P 500)
• Also, its quarterly revenues grew 6.4% to $599 Mil in the most recent quarter from $563 Mil a year ago (vs. 4.8% improvement for S&P 500)
How Profitable Is Dnow?
Dnow’s profit margins are much worse than most companies in the Trefis coverage universe.
• Dnow’s Operating Income over the last four quarters was $121 Mil, which represents a poor Operating Margin of 5.0%
• DNOW Operating Cash Flow (OCF) over this period was $201 Mil, pointing to a poor OCF Margin of 8.3% (vs. 14.9% for S&P 500)
• For the last four-quarter period, DNOW Net Income was $82 Mil – indicating a poor Net Income Margin of 3.4% (vs. 11.6% for S&P 500)
Does Dnow Look Financially Stable?
Dnow’s balance sheet looks very strong.
• Dnow’s Debt figure was $41 Mil at the end of the most recent quarter, while its market capitalization is $1.5 Bil (as of 7/2/2025). This implies a very strong Debt-to-Equity Ratio of 2.6% (vs. 19.4% for S&P 500). [Note: A low Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $219 Mil of the $1.7 Bil in Total Assets for Dnow. This yields a strong Cash-to-Assets Ratio of 13.3%
How Resilient Is DNOW Stock During A Downturn?
DNOW stock has fared worse than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
Inflation Shock (2022)
• DNOW stock fell 40.4% from a high of $11.77 on 12 March 2021 to $7.01 on 19 August 2021, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 6 June 2022
• Since then, the stock has increased to a high of $17.59 on 18 February 2025 and currently trades at around $14.40
Covid Pandemic (2020)
• DNOW stock fell 65.6% from a high of $11.82 on 16 January 2020 to $4.07 on 30 October 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 6 June 2022
Putting All The Pieces Together: What It Means For DNOW Stock
In summary, DNOW’s performance across the parameters detailed above is as follows:
• Growth: Strong
• Profitability: Very Weak
• Financial Stability: Extremely Strong
• Downturn Resilience: Very Weak
• Overall: Neutral
Combined with its deeply discounted valuation, this supports the view that DNOW is an attractive buy.
While DNOW stock looks promising, investing in a single stock can be risky. You could explore the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.
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