Aug 14, 2026 · 49 min
DNOW bets on integration recovery to unlock distributor value
$DNOW: the boring distributor that could double on 2029 numbers | Firebird Management
DNOW’s investment case depends on whether ERP disruption fades into stronger earnings and free cash flow without requiring a major rebound in drilling.
- 1MRC Global expanded DNOW’s addressable markets but its ERP integration has pressured margins, working capital, and execution.
- 2The valuation rests on recovering EBITDA and free cash flow rather than a simple return to peak oilfield activity.
- 3A fragmented distribution market and exposure to infrastructure spending could support a $30–$32 share price by 2028–2029.
Don't miss
Steve Gorelik lays out how normalized free cash flow and operational stabilization could support a $30–$32 DNOW valuation by 2028–2029.
The brief
Steve Gorelik of Firebird Management joins Andrew Walker to examine DNOW, an energy distributor spun out of National Oilwell Varco and shaped by oilfield cyclicality.
The MRC Global acquisition broadened DNOW into downstream, utilities, and other markets, but combining SAP and Oracle systems created costly execution problems.
The central question is whether weaker margins and working capital reflect temporary integration disruption or a structurally less profitable combined business.
Gorelik’s valuation framework emphasizes normalized EBITDA and free cash flow after capital spending, interest, taxes, stock compensation, and inventory changes.
The long-term case pairs operational stabilization with fragmented distribution markets and infrastructure demand, supporting a scenario of roughly $30–$32 per share by 2028–2029.
What was said on this episode
19 statements · 14 positive · 2 negative · 1 mixed · 2 neutral
DNow’s acquisition-led distribution model can produce efficient growth and strong returns on capital.
“And as a result of that, you get a fairly good, efficient growth and returns on capital.”
Listen at 5:30
DNow’s oil-and-gas market may be stabilizing or beginning to grow.
“But I think there is something that's happening here.”
Listen at 9:01
Rising U.S. rig counts are helping DNow.
“So like in US, we're talking about the rate counts. Right now, I think we're around something 590. We started six months ago, we were at 530. So we're already seeing about a 10% increase in number of rigs in the United States, which is actually helping companies like Dinao.”
Listen at 12:46
DNow’s recent growth may be only the beginning.
“But I think it's just the beginning of what we could be seeing from this company.”
Listen at 13:09
DNow increased margins and profitability despite declining oil-and-gas investment.
“But even without it, I think this is a company that has shown, and if you look at their results kind of like within the last five years or so, in the environment in which the oil and gas investment has been declining, they still managed to do pretty well. And they still managed to increase their profit margins. They still managed to increase their profitability as well.”
Listen at 16:54
DNow’s projections for next year are likely conservative.
“I do think that they're being very conservative about the projections for next year”
Listen at 26:00
DNow and MRC should earn more as demand improves.
“if you would ask just the question of, should these companies be making more money or less money? I think the answer should be more”
Listen at 26:34
DNow historically traded around a 5–6% free-cash-flow yield.
“historically, this number was quite volatile, but it averages out that on average for DNow, the market was willing to pay about 5% to 6% free cash flow.”
Listen at 29:26
DNow’s 2027 free-cash-flow yield is approximately 10% at today’s price.
“So that means on 2027, today you're getting about a 10% free cash flow yield.”
Listen at 31:07
DNow’s projected EBITDA level should be relatively easy to achieve.
“Yes, and that is on the EBITDA number that I would argue there should be relatively easy to achieve for them.”
Listen at 32:08
DNow’s 3–5% annual growth deserves a higher valuation multiple.
“And once you have that, that does deserve a higher wealth.”
Listen at 35:03
DNow has historically timed share repurchases effectively.
“So they've been opportunistic and historically have shown to be pretty smart about when they're buying back shares.”
Listen at 36:52
DNow’s macro backdrop and experienced management create multiple ways to win.
“But I think given the macro background switching from a headwind to a tailwind, and the people who are involved here with David Cherishinsky being there, he's been at Dino for I think over 25 years and has a pretty good history of prior acquisitions that they've made in the past. You're getting into a situation in which there's a few ways to win from here.”
Listen at 39:32
The combined DNow-MRC distribution business has less than 20% market share.
“but I know that it's below 20%.”
Listen at 40:55
DNow could reach approximately $30–$32 per share by 2028–2029.
“you can get to about 30, $32 per share.”
Listen at 41:24
DNow should remain public only if public status lowers its cost of capital.
“if the being public lowers its cost of capital, then yes. But if it does not, then maybe this is a given how volatile the business they're in, maybe it should be private.”
Listen at 41:32
Private equity is unlikely to pursue a highly levered DNow in a shrinking market.
“So I don't think people want to touch that.”
Listen at 43:20
DNow could benefit from investment in utilities, refineries, and data centers.
“could be in all the right places if we're going to see the type of investment that is being talked about in utilities and refineries and data centers, et cetera.”
Listen at 44:34
Low-margin distribution markets discourage new competitors from entering.
“So your natural level of competition of people, I don't think you're going to have a lot of people saying that, oh, I want to build a new Dino.”
Listen at 46:09
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.
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