$18.51
$37.91
bear $18.51
base $28.40
bull $37.91
margin of safety $16.50
market price* $28.03
Innovex International makes and rents engineered, largely consumable products used downhole in oil and gas wells during construction, completion, production and intervention: float equipment, casing and cementing tools, well-construction and completion hardware, and, since the September 2024 merger with Dril-Quip, subsea wellheads and offshore equipment. Innovex Downhole Solutions was the accounting acquirer and kept Dril-Quip's listing under the new ticker INVX, so the business as it exists today has only one full year of combined results, 2025. In 2025 revenue was about $978 million: US land about 44%, US offshore about 11%, Canada about 9%, with the rest from Saudi Arabia (about $70 million), the wider Middle East and Asia-Pacific, Europe and the Caspian and Africa, Brazil and Mexico. In the first half of 2026 North America was about 55% of sales. Earning power. After stripping out working-capital swings and charging stock compensation and all capital spending as a cost, the combined business produced about $122.7 million of owner cash in 2025, or $1.77 a share. Earlier per-share figures ($2.22 in 2022 and $2.56 in 2023) describe legacy Innovex alone on a much smaller share count, and 2024 blends four months of the merged company, so we no longer average those years in as our previous analysis did; 2025 is the only year that describes today's company. Two adjustments were made. First, Innovex paid only about $10 million of cash tax in 2025 against roughly $22 million that a normal rate would imply, because it is using $343 million of federal tax loss carryforwards (part of them limited by ownership-change rules). That saving runs out, so we tax the ongoing business at a normal rate and count the losses separately as a one-time asset worth about $55 million in today's money. Second, Norway-based TCO Group, bought on July 1, 2026 for about $95 million ($65 million in cash plus about 1.06 million new shares), earned about $12 million with almost no capital spending in 2025, which we add. Interest is negligible (about $1 million paid in 2025, nothing drawn on the revolving credit line since). The starting level is about $123.5 million a year, or $1.75 per share on about 70.7 million diluted shares including the TCO shares. Amortization of acquired customer relationships, trade names and technology (about $16 million in 2025) is added back as a non-cash charge; because those assets wear out, we assume no long-run growth in any case except the bull, rather than letting them count as permanent. Recent results. In 2025 owner cash per share grew about 25%, but that was mostly the effect of a full year of the merger. In the first half of 2026 revenue rose only about 4%, yet gross profit rose about 13%, with gains in both the first and second quarters, as merger savings came through, and pretax profit before the items below rose about 15%. We therefore assume about 8% growth in the first year, below both of those figures, and nothing after that in the base case. We do not credit a North American recovery, further international share gains, or growth from future acquisitions: Innovex buys businesses regularly (SCF Machining and Citadel in 2025, Drilling Innovative Solutions and TCO in 2026), but each deal is paid for, and we can't show that future deals will be bought for less than they are worth. Litigation. In March 2026 a jury found that friction-reduction tools sold by Downhole Well Solutions, an Innovex subsidiary, infringed patents held by Impulse Downhole Solutions, awarding about $47.6 million and finding the infringement willful. Innovex has booked a $51.6 million liability and plans to appeal to the Federal Circuit. We treat the booked amount as money owed in every case. Because a willfulness finding lets the court raise damages, the bear case adds another $47.6 million. Base case (about $28 per share). Owner cash rises about 8% next year as the merger savings seen in 2026 hold, then stays flat in dollars through year 30. That assumes today's mix of North American land work, which is cyclical, and steadier international and offshore work averages out over the cycle. After that it fades to zero over ten years. Well-construction and production consumables are used up and bought again on every well, and producers must keep drilling to offset the natural decline of existing fields, which supports a long life, but we don't credit oil and gas drilling beyond about four decades. The business is worth about $1,921 million. It owes about $81 million (finance leases of $25 million, the $51.6 million verdict liability and a $4 million earn-out) and holds about $112 million of cash beyond operating needs after the TCO payment, plus the $55 million tax asset, so shareholders are $86 million better off than the business value alone: about $2,007 million, or $28.40 per share. Bear case (about $19 per share). A North American land downturn of the kind the industry has had repeatedly cuts owner cash about 35% for two years. It recovers only to 85% of today's level and stays there through year 20, then fades to zero over ten years. The court raises the patent damages, adding $47.6 million, and the tax losses are used more slowly. The business is worth about $1,274 million. It owes about $128 million and holds $112 million of excess cash plus a $51 million tax asset, so about $1,308 million is left for shareholders, or $18.51 per share. Even at the trough, the business earns far more than its small interest bill. Bull case (about $38 per share). The margin gains of 2026 carry a little further (about 15% growth next year). The international business keeps growing about 3% a year for nine years on the pattern already visible in Saudi Arabia, Brazil and Europe and Africa, and earnings then stay flat until a ten-year fade starting in year 36. The business is worth about $2,593 million. With the same $86 million net benefit from cash and tax assets after debts, that is about $2,679 million, or $37.91 per share. Change from our previous analysis. Earlier we valued Innovex at about $29, $58 and $72 per share in the bear, base and bull cases. The estimate is lower now for four reasons. First, we no longer assume the business grows forever: once growth we can't evidence stops, earnings stay flat and eventually fade. Second, we tax the business at a normal rate and count the tax-loss savings once, instead of treating them as permanent. Third, we now subtract the patent verdict. Fourth, the earning level now rests only on the combined company rather than on legacy Innovex per-share figures. The debt treatment helps rather than hurts. Our previous analysis noted Innovex's small borrowings and large cash balance but did not count them. We now value the business first, subtract everything it owes, including the verdict and lease obligations, and add back surplus cash and the tax asset. That adds about $1.20 per share. What would make this wrong: a deeper or longer North American downturn than past ones, an enhanced patent award above what the bear case assumes, or poorly priced acquisitions. On the other side, the merger savings could keep building beyond what the first half of 2026 shows. Cash flow in the first half of 2026 ($56.9 million from operations) was held down by about $50 million of working-capital build, which we exclude from the earning level.