Is DNOW (DNOW) Undervalued Ahead Of Its August 5 Earnings?

Analyst sentiment and upcoming earnings set the tone for DNOW

DNOW (DNOW) heads toward its confirmed August 5 earnings date with a current Strong Buy consensus from six analysts over the past 3 months, following its most recent earnings call on May 7.

See our latest analysis for DNOW.

DNOW shares trade at US$13.05 and have seen short term momentum cool, with a 30 day share price return down 5.43%, even as the 3 year total shareholder return sits at 20.50% and the 5 year total shareholder return at 41.08%.

If DNOW has you thinking about where else momentum and long term performance might line up, it could be worth scanning 34 power grid technology and infrastructure stocks for other infrastructure focused stocks catching investors' attention.

After a softer 30 day stretch but solid multi year returns, DNOW sits below analyst targets and at a sizeable intrinsic discount. The key question is how much of the potential upside might still be ahead rather than already priced in?

Most Popular Narrative: 19.7% Undervalued

Compared with DNOW's last close at US$13.05, the most followed narrative pegs fair value at US$16.25, so the earnings story behind that gap matters.

Expansion into the midstream market through the acquisition of Whitco is expected to bolster supply chain capabilities, particularly in the aging and undersized midstream infrastructure. This may potentially increase revenues by accessing a larger market and offering day to day MRO and capital project opportunities. This aligns with increasing demand for midstream services as energy companies look to expand and upgrade infrastructure.

Read the complete narrative.

Curious what turns this into a higher fair value for DNOW? The narrative considers a combination of faster top line growth, improving margins, and a richer future earnings multiple. The exact mix of those three is where the story gets interesting.

Result: Fair Value of $16.25 (UNDERVALUED)

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

However, DNOW is still exposed to softer U.S. rig activity and natural gas infrastructure constraints, which could pressure revenues and challenge the fair value narrative if these conditions persist.

Find out about the key risks to this DNOW narrative.

Next Steps

Feeling torn between DNOW's potential and its risks? Act while the information is fresh and weigh both sides by checking the 4 key rewards and 1 important warning sign.

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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.

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