Source: YCharts.com
R&D
When it comes to research and development, Stratasys, Ltd. (NASDAQ:SSYS) stands out. Stratasys continues to invest heavily in new product development, where its R&D investment jumped to $10.8 million in the first quarter and which was the highest among the three 3D printing companies. While both 3D Systems Corporation (NYSE:DDD) and Stratasys had rapidly increased their R&D investments since 2010, 3D Systems Corporation (NYSE:DDD)’ R&D investment declined in early 2013 after topping out in late 2012 as seen from the chart below. Stratasys, Ltd. (NASDAQ:SSYS)’ R&D spending is indeed unmatched within the industry, as claimed by the management.
Source: YCharts.com
Free cash flow
The free cash flow comparison will mainly be between Stratasys, Ltd. (NASDAQ:SSYS) and 3D Systems Corporation (NYSE:DDD) due to the limited data for ExOne Co (NASDAQ:XONE).
Source: YCharts.com
Free cash flow remains a concern for Stratasys as it continues to decline since mid-2012. 3D Systems, on the other hand, has significantly increased its free cash flow since early 2009. At the time of this writing, the author was not able to obtain the latest free cash flow update for the first quarter of 2012 after reviewing Stratasys’ first quarter report and earnings call transcript. However, according to the first quarter report, GAAP net income for the first quarter was a loss of $15.5 million versus a pro forma loss of $8.4 million in the first quarter of 2012.
M&A and recent developments
In December 2012, Stratasys, Ltd. (NASDAQ:SSYS) and Objet Ltd. completed their merger. Stratasys expects to be generating between $7 and $8 million of annual net cost synergies and between $3 and $4 million in annual tax savings after the merger. By combining with Objet, Stratasys can add to its roster inkjet-style 3D printers, which offer faster printing with finer detail. With the merger, the new company is able to pull more resources into R&D. Stratasys continues to integrate according to its plan.
On the other hand, 3D Systems Corporation (NYSE:DDD) is going mainstream by working with Staples to sell its Cube 3D printers. The printers, which can print items up to 5.5 cubic inches in size, will be available in select stores and online for $1,299 at the end of June. The selling of the Cube 3D printers at Staples will increase the public awareness of 3D printing. Although it is unclear yet how much sales will be generated for 3D Systems in the near-term, more retailers are expected to carry 3D printers as more options become available and pricing becomes more affordable for the general public. Going mainstream is an important step for 3D printing companies if they hope to grow continuously and expand their margins.
Unlike Stratasys and 3D Systems Corporation (NYSE:DDD), which reported better-than-expected earnings results, ExOne had a rough first quarter with a larger-than-expected loss despite nearly tripling its revenue as compared to the same quarter in the previous year. While Stratasys and 3D Systems have a diversified portfolio of printers targeting several different markets, ExOne Co (NASDAQ:XONE) only focuses on high-end industrial printers. ExOne Co (NASDAQ:XONE) was negatively impacted by the slow economy, especially in Europe. The company’s management continues to expand ExOne’s manufacturing capacity in Germany, however, all while upgrading its PSCs and establishing a more robust PSC network. ExOne expects for approximately two-thirds of its revenue to fall in the second half of the year.
While there are also safety concerns about gun control for 3D printing, 3D printing will not stop here, and more legislation and control procedures will have to follow-up. According to Gartner, early adopters of 3D printing technology could help the company gain an innovation advantage over rivals and enterprise-class 3D printer will be available for under $2,000 by 2016. The outlook for 3D printing remains strongly positive.
What now?
3D printing is a disruptive technology that will greatly impact our daily lives with its additive manufacturing capabilities. As 3D printing goes into mass market, its utilization will only be limited by our imagination. In the near-term, 3D printing will still be bound by its speed and materials. Investors should follow-up closely with this developing 3D printing trend. The share prices for these 3D printing companies will be supported with fast revenue growth and margin expansion.
Bottom line
Stratasys’ revenue should continue to grow rapidly, as the company’s management is targeting a long-term annual revenue growth rate of at least 20%. By investing heavily into R&D, Stratasys, Ltd. (NASDAQ:SSYS)’ research advancements are now unmatched by its peers. This has raised some concerns for Stratasys on the cash flow end, however. Despite pulling back its R&D investment in early 2013, 3D Systems continues to have a steady free cash flow. At this moment, there is no clear winner between Stratasys and 3D Systems Corporation (NYSE:DDD), though both of the companies as well as ExOne Co (NASDAQ:XONE) will continue to enjoy the booming of 3D printing.
The article Which 3D Printing Company Is The Best Bet? originally appeared on Fool.com and is written by Nick Chiu.
Nick Chiu 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. Nick is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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