Steven Gorelik of Firebird Value Advisors presents DNOW Inc. (NYSE: DNOW), a roughly $2.4 billion oil and gas distributor operating around 300 energy centers concentrated in North America. The thesis centers on the company’s November 2025 all-stock merger with MRC Global, which roughly doubles revenue and gives the combined entity about 20% share of a highly fragmented market. The two businesses are complementary rather than overlapping — DNOW serves upstream and midstream customers while MRC brings downstream and gas-utility reach — making the combination unusually synergistic. Gorelik also points to a supportive backdrop, with global upstream capital spending down roughly 40% in real terms from its 2014 peak and Middle East supply risk potentially triggering a new investment cycle reminiscent of the 1970s.
The near-term complication is MRC’s botched Oracle ERP implementation, carried out shortly before the deal, which caused a working-capital blowout and pushed profitability to zero. DNOW is migrating MRC onto its own SAP system, and while manual workarounds still inflate costs, Gorelik reports the situation stabilized in the first quarter of 2026 with very few customers lost and extra costs clearing by year-end. Combined EBITDA is targeted at roughly $390–400 million, including $70 million in synergies, of which $23 million was already realized in Q1. On valuation, Gorelik expects about $300 million of free cash flow next year, implying a free-cash-flow yield near 14% against a market capitalization around $2.5 billion — versus a historical average closer to 5% — and frames a potential 3x upside on pure normalization. The company carried no debt before the merger, is paying down the roughly $455 million inherited from MRC, and is led by a CEO with 37 years at DNOW who has integrated 25 prior acquisitions successfully.
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