ERP issues and legal investigation put DNOW (DNOW) under closer scrutiny

DNOW (DNOW) is in focus after the Portnoy Law Firm began probing potential securities fraud, following the company’s disclosure that a new Enterprise Resource Planning system created operational issues and financial impacts.

At a share price of US$12.25, DNOW has seen a 5.33% 30 day share price return but a 9.73% 90 day share price decline. The 1 year total shareholder return of 18.82% decline contrasts with positive 3 and 5 year total shareholder returns, suggesting that recent momentum has faded as investors reassess risk after the ERP disruption and legal probe.

If this kind of operational setback has you thinking about diversification, it could be a good moment to look at companies in the power and infrastructure supply chain via our 30 power grid technology and infrastructure stocks

With DNOW trading at US$12.25, a 30.6% discount to the US$16.00 analyst target and an estimated 48.5% intrinsic discount, the question is whether this ERP sell off is an entry point or whether the market is already bracing for weaker growth.

Most Popular Narrative: 23.4% Undervalued

Against the last close of $12.25, the most followed narrative places DNOW’s fair value at $16.00, framing the current ERP setback inside a longer term recovery story.

Expansion into midstream market through the acquisition of Whitco, expected to bolster supply chain capabilities, particularly in the aging and undersized midstream infrastructure, potentially increasing 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.

Want to see what is backing that $16.00 fair value? The narrative leans heavily on faster revenue growth, improving margins, and a richer earnings multiple baked into 2029 assumptions.

Result: Fair Value of $16.00 (UNDERVALUED)

However, you still need to keep an eye on weaker U.S. drilling activity and stiff competition, which could pressure both revenues and the valuations that analysts are using.

Next Steps

Mixed signals on DNOW’s outlook so far? Take a closer look at the data now so you can form your own view with 3 key rewards and 1 important warning sign

Looking for more investment ideas?

If DNOW's story has you thinking about your next move, do not stop here. Use this moment to widen your watchlist with a few focused stock ideas.

• Start with quality by checking companies that pair healthy fundamentals with strong finances through our solid balance sheet and fundamentals stocks screener (40 results)
• Hunt for potential bargains by scanning companies that our models flag as attractively priced with the 1 high quality undervalued stocks
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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.