With the president calling for new initiatives on the federal minimum wage, immigration, gun control, and early childhood education, the Dow Jones Industrial Average was filled with ennui, closing the day down 35 points. It’s been hovering around the 14,000-point threshold for the past seven trading days, leaving analysts wondering whether it’s peaked or readying itself for the next leg up.
| Company | % Gain |
|---|---|
| Proto Labs (NYSE:PRLB) | 13% |
| Vonage (NYSE:VG) | 7% |
| Pharmacyclics, Inc. (NASDAQ:PCYC) | 16% |
Share performance past five days.
Now, resist the urge to high-five everyone in the cubicles next to you. Smart investors won’t celebrate until they know why their stock surged, because without a fundamental basis for the bounce, these stocks could just as quickly make the return trip down.
Printing money
The difference between Proto Labs and 3D Systems Corporation (NYSE:DDD) and Stratasys, Ltd. (NASDAQ:SSYS) is that the latter two sell you the tools to do your own 3-D printing, the printers and consumables, while the former does it for you. Product developers submit their designs to Proto Labs, and they’ll manufacture custom parts and prototypes to the specifications.
Proto Labs believes the low-volume manufacturing market has been underserved because it’s often difficult to ascertain what it will cost to produce these low-run custom items. But using a complex algorithm to analyze the design and determine what it takes to manufacture it, Proto Labs is able to appropriately quote the spec and still live up to its motto, “real parts, really fast.”
It must be working, because the 3-D parts maker reported financial results showing that fourth-quarter revenues surged 31% ahead of analyst expectations, generating profits of $0.31 per share, a $0.05 beat to Wall Street forecasts. At around 40 times earnings estimates, Proto Labs is comparably priced to 3D Systems and Stratasys, but when you factor in what analysts are expecting in terms of long-term growth, Proto Labs is the cheaper stock.
Dialing up profits
Also apparently working out is Vonage’s reintroduction of service agreements, those pernicious contracts that require you to remain with a specific carrier for a set period of time, sort of like an indentured servant who has to work off his debt. Customer churn at the VoIP specialist dropped to 2.5% from 2.7% a year ago, and though it was flat sequentially, it just might have been lower had Pakistan not raised the cost of completing an international call in the country by an unprecedented 500%. Obviously, Vonage couldn’t keep the country on its unlimited access plan, and it resulted in 15,000 net line reductions in the quarter.
The carrier implemented the service agreement plan a year ago, and though I thought it a risky option to believe that more customers didn’t want to be tethered to a company for two years, Vonage seems to be making it work in its favor.
Revenues were up 3% to $214 million, and though earnings declined slightly on a per-share basis they remained flat as it continued to buy back shares. That also informed its decision to authorize a new $100 million repurchase program as well as entering into a new credit agreement for up to $145 million.
