In any market, innovation spawns opportunity. While equity market conditions matter for companies that are raising capital, new industries are perpetually being born with the invention and adoption of new technology.
One industry that’s in its early stages and well worth your attention over the coming quarters is three-dimensional (3D) printing. This industry is very much on the cusp of migrating to the consumer’s level. It’s a very interesting investment theme for risk-capital investors.
One company we looked at previously is The ExOne Company (XONE). This company was one of the most successful initial public offerings (IPOs) this year, but the stock retrenched significantly after an earnings miss. However, ExOne’s failure to meet expectations does not mean that this innovative company won’t become a burgeoning enterprise.
ExOne is based in North Huntington, P.A., and it manufactures 3D printing machines that help industrial customers in the aerospace, energy, automobile, and heavy machinery sectors create prototype parts for their respective businesses. ExOne builds its printing machines in the U.S. and Germany, and a full expansion is underway.
In its most recent quarter, the second quarter of 2013 (ended June 30), ExOne generated $9.2 million in total revenues. Approximately 63% of these sales were for 3D printing machines and micromachinery, with 37% of sales coming from other related products and materials. This compares to total sales of $4.7 million in the second quarter of 2012.
According to the company, it sold four of its largest 3D printing machines to customers in Japan, the U.S., Russia, and India.
Revenues for the first six months in 2013 were $17.2 million, compared to $7.4 million, for a gain of 132%.
While the company is spending on research and development, it’s spending more on selling, general, and administrative expenses. Like most newly listed stocks, ExOne incurred quite a bit of expenses in effecting its IPO.
The company said its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were a loss of $300,000 in the second quarter of 2013, up from a loss of $2.7 million in the comparable quarter.
Net loss attributable to the company was $1.12 million in the latest quarter, compared to $3.5 million. Many investors expected the company to be profitable in the second quarter. The resulting loss caused Wall Street analysts to lower their estimates for this year and next.
When ExOne’s share listed on the stock market, the position drifted initially; it then proceeded to advance almost 200% before experiencing a major retrenchment beginning in September. The company’s chart is featured below:
Chart courtesy of www.StockCharts.com
The big retrenchment was partially due to ExOne’s second loss, but also because of the further issuance of new shares by the company and selling insiders. It isn’t a surprise that the company hit up the equity market for more cash, especially considering how strong the stock performed.
IPOs can be very tough equity securities to trade because valuation is often trumped by expectation. But ExOne is a company with a determined growth path. The Street currently estimates sales to grow just under 70% this year and over 50% again in 2014. (See “Hot IPOs Emerging in This Lucrative Sector.”)
3D printing is a relatively new industry and should be on every speculative investor’s radar. NASA plans to launch a toaster-sized 3D printer into space next year so astronauts can make plastic tools and parts as needed. This is a technology that’s going to grow significantly this decade.