If there was one non-resource, speculative sector of the stock market in which to devote a considerable amount of effort, I’d go with three-dimensional (3D) printing. This is a burgeoning new industry that will soon transition from industrial to retail use.
Stratasys Ltd. (SSYS) has had an exceptional last two years, finding its stride as a modeler and leading manufacturer of 3D printers. On the stock market, the position is up approximately six-fold over the last two years. This is an institutional favorite and likely to remain this way as the company’s growth has been exceptional.
According to Stratasys, for the three months ended September 30, 2013, total sales grew to $125.6 million, which compares to $49.7 million in the same quarter last year.
The company acquired “MakerBot,” whose numbers are included from August 15, 2013. Pro forma including MakerBot, the company shipped a cumulative 64,855 systems worldwide as of September 30, 2013.
During the most recent quarter, Stratasys sold 5,175,000 ordinary shares at $93.00 each for net proceeds of approximating $462.9 million. The company’s quarter end cash position was $616.5 million, or $12.65 per share, which provides a lot of resources for expansion.
Other 3D printing companies are also experiencing substantial financial growth in operations. The entire industry is therefore a worthwhile focus of substantial investment research.
3D Systems Corporation (DDD) doubled on the stock market since April and doubled again in value since April of 2012.
In the third quarter of 2013, the company’s shareholders’ equity and cash position soared. Revenues totaled $135.7 million compared to $90.5 million. Earnings were $17.7 million compared to $13.5 million.
Total revenues from U.S. operations in the third quarter of 2013 grew $25.6 million, or 52% to $74.4 million, way up from $48.8 million in the third quarter of 2012.
Revenues from European operations grew 28% to $32.8 million. Revenue from Asia-Pacific operations grew 77% to $28.5 million.
In September, the company’s shares hit $50.00. Now they’re around $70.00, which makes for an expensive valuation, but that is the point; the company is generating substantive economic growth and has the prospect of continuing the trend, which is the reasoning for its high valuation. (See “Top-Line Growth to Keep This Tech Company Ticking Higher.”)
I think every speculative investor should have this entire industry on their radar. With more institutional participation and growing media exposure, there are going to be more entrants to this industry and more initial public offerings (IPOs).
A company’s valuation is a very difficult thing to discern in an environment of hyper-enthusiasm for 3D printers. But it is still early days for many of these enterprises, and while only appropriate for risk-capital investors, a new industry is quickly being formed.
The ExOne Company (XONE) reports tomorrow. The company’s share price retreated substantially in September but recovered on strong capital markets.
Regardless of the hype, 3D printing isn’t a fad that’s going away. It is a useful new technology that will very soon become mainstream—meaning investors should keep an eye on this sector for future investment opportunities as well.