3D Systems’ growth has been phenomenal, to say the least. In fact, Forbes magazine ranked it as the fourth fastest-growing tech company in 2012. In its last three years it has reported 46% and 30% growth in revenues and earnings. Furthermore, markets are foreseeing a growth rate of 37% in next 12 months.
So should you invest in it now? That might not be a good decision. Potential investors should note that 3D Systems is trading at 41 times its current year’s earnings and 33 times next year’s earnings estimates. Its market cap is more than 10 times its annual sales, it has a PEG ratio of more than 2 and it is not a dividend-paying stock. In short, there is very little attractiveness here. Therefore, despite the expected improvements in the coming quarters, I believe that at the current price levels, 3D Systems Corporation (NYSE:DDD) does not have significant room for growth and the stock is overpriced at the moment.
Stratasys, Ltd. (NASDAQ:SSYS) is more focused towards industrial clients. But it has recently acquired MakerBot, a leader in desktop 3-D printing, for $403 million. This is a significant move in the consumer category. Through this acquisition, I believe that Stratasys will ramp up the competition with 3D Systems’ Cube product line. This will be a significant step towards relatively cheaper printers. Currently, its lowest priced printer goes for around $10,000, while MakerBot’s Replicator 2 (being sold by Amazon) sells for around $2,200. In reply, 3D Systems will offer significant price cuts that will make its products far more appealing to consumers. It is expected to lower Cube’s prices to below $1,000 in the next 12 to 18 months.
Stratasys, Ltd. (NASDAQ:SSYS) is also as expensive as 3D Systems Corporation (NYSE:DDD) in terms of price-to-earnings based on current and next year’s estimates. But what makes it less appealing is that it hasn’t been profitable and generates negative free cash flow. It generates return on assets of just 0.5% and return on equity of -1.27%. Therefore, I believe that Stratasys is even less attractive than 3D Systems and definitely not a buy, but a hold at the current price levels.
ExOne is the new star of this industry. ExOne develops large, expensive industrial size printers for corporate customers. Sales volume is on the lower side; it sold just five printers in the last quarter but ended up with sales of $7.9 million. In this business model where the company is focused on the top end of the market, even a small increase in sales volume gives a big boost to revenues. This is exactly what has been happening as ExOne has recently posted quarterly year-over-year revenue growth of more than 190%. The business is not profitable yet, but what makes ExOne more interesting than the industry leaders is that it is more focused on a specific customer segment.
The markets have a high degree of optimism about metals printing in general and ExOne’s M-Flex metal-printing system in particular. This was reinforced by the expected increase in demand from companies like General Electric and Ford Motors.
The stock is trading more than 5,000 times its current year’s earnings estimates. This unusual number shows that although it is far more expensive than its bigger rivals – based on its own impressive growth as well as a possibility of a takeover – the markets are expecting big things from ExOne, which would push the shares even higher. Therefore, I would recommend ExOne.
The Economist compares this disruptive invention to the steam engine and the printing press. Business Insider says it’s “the next trillion dollar industry.” And everyone from BMW, to Nike, to the U.S. Air Force is already using it every day. Watch
Sarfaraz Khan has no position in any stocks mentioned. The Motley Fool recommends 3D Systems, Stratasys, Ltd. (NASDAQ:SSYS), and The ExOne Company. The Motley Fool owns shares of 3D Systems and Stratasys, Ltd. (NASDAQ:SSYS) and has the following options: Short Jan 2014 $36 Calls on 3D Systems and Short Jan 2014 $20 Puts on 3D Systems.
The article Which 3-D Printing Company Should You Choose? originally appeared on Fool.com.
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