One small step for a 3-D printer, one giant leap for the 3-D printing industry
I’ve been more bullish on the industry since last June, as I said in “The 3-D Printers: How Do the Players Stack Up?” I became more confident in the industry when 3D Systems Corporation (NYSE:DDD) received certification to use its systems in a broad range of healthcare products. I viewed that as a vote of confidence — and we all know there’s much money in healthcare.
I feel the same way about NASA’s goal of using 3-D printing in a variety of ways. (NASA has several forays into 3-D printing going. Another one involves using 3-D printers to produce meals during longer missions.) Not only is NASA (and the broader aerospace industry) a huge market, there’s an added bonus: Tech innovations are often helped along by governmental agencies, such as NASA and DARPA.
Industry will skyrocket, but how do the major 3-D players stack up now?
The 3-D printer stocks were in jet-propulsion mode from my April piece through last week. Even after giving up 13%-17% of their gains in the past three trading days, two of the three are still up significantly in the past 1-1/2 months. Through June 3, 3D Systems is up 30%, Stratasys, Ltd. (NASDAQ:SSYS) is up 2%, and ExOne Co (NASDAQ:XONE) – which went public in February and focuses on high-end, industrial use printers — is up 27%.
For the 1-year period, 3D Systems Corporation (NYSE:DDD) and Stratasys are up 68% and 14%, respectively. ExOne (NASDAQ:XONE) is up 53% since its Feb IPO.
Some of the rise since April has been “earned,” as 3D Systems and Stratasys, Ltd. (NASDAQ:SSYS) turned in solid Q1 results since my article. (ExOne missed estimates, but the numbers look worse than the reality. Its systems run $500K and up; thus, selling just one printer short of expectations can cause a significant miss, especially since the company is a small cap stock.) Bulls shouldn’t be overconfident, as short covering has no doubt been a reason for part of these run-ups. Short interest remains high at 31%, 11%, and 28%, respectively, of floats.
In my last article, I recommended buying two or three 3-D printing plays for investors wanting exposure to the industry. At that time, I particularly liked 3D Systems, as it had the best overall numbers, not to mention a CTO who invented 3-D printing. Its valuation (27 forward P/E and 1.2 5-year PEG) was reasonable then. That has changed. Its forward P/E is now 34 and the PEG is 2.9. A 1.2 PEG is reasonable; a 2.9 is running out of oxygen territory.
Some current numbers:
| Company | Trailing P/E | Fwd P/E | 5-Yr PEG | 3-Yr Avg Rev Growth | 3-Yr Avg EPS Growth | Net Margin (ttm) | ROE (ttm) | Debt/Equity (mrq) |
|---|---|---|---|---|---|---|---|---|
| 3D Systems | 100 | 34.4 | 2.9 | 46.3 | 249 | 10.2 | 9.7 | 0.10 |
| Stratasys | N/A | 31.5 | 1.5 | 29.8 | 21.6 | (4.3) | (1.3) | 0 |
| ExOne | N/A | 78.1 | N/A | N/A | N/A | (31.1) | N/A | 0.06 |
Sources: Yahoo! Finance & Morningstar. Data to June 3. All figures percentages, except PEs, PEGs, and D/E.
The bottom line
My opinion remains the same as in April. However, there’s now more emphasis on these stocks being suitable for those with higher-risk tolerances given the now even higher valuations and high betas. Ideally, investors should have knowledge of risk management practices.
“There’s little doubt that 3-D printing will be a major disruptive technology. The industry is expected to grow at a 25+% annual clip for the next six or more years.
That said, identifying the eventual winner or winners is especially difficult with emerging technologies. Thus, those interested in investing in 3-D printing might consider buying a couple companies to cover more bases. I’m not suggesting investing more than you might otherwise, just that you divide what you’d invest in one stock into two, or perhaps three. One huge winner will more than offset one or two so-so stocks or even losers.”
Investors can also gain exposure to the industry through investing in companies that make 3-D design software, such as Dassault Systemes S.A. (ADR) (OTCMKTS:DASTY) and Autodesk, among others.
BA McKenna has no position in any stocks mentioned. The Motley Fool recommends 3D Systems, Stratasys, and The ExOne Company. The Motley Fool owns shares of 3D Systems and Stratasys and has the following options: Short Jan 2014 $36 Calls on 3D Systems and Short Jan 2014 $20 Puts on 3D Systems.
The article A 3-D Printer Is Blasting Off to the International Space Station originally appeared on Fool.com.
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