Did You Know There Are Two 3-D Printing Industry Indices?
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Crank out a gold and silver medal, 3-D Systems (NYSE: DDD), Stratasys (NASDAQ: SSYS), The ExOne Company (NASDAQ: XONE), or Arcam! They go to the Germans and a Swiss/German team, respectively, for developing 3-D printing industry indices.
I figured it was only a matter of time before 3-D printing indices were developed and marketed, given 3-D printing is expanding beyond a techie topic and entering the mainstream consciousness.
Structured Solutions launched Solactive 3D Printing Index in March, and STOXX launched STOXX Global 3D Printing Tradable Index in April. These companies license indices to financial institutions for use with exchange-traded funds and other investment vehicles. There aren't any investments based on these indices yet, to my knowledge.
Solactive 3D Printing Index (SOLDDD)
The index was launched with seven holdings, all of which are equally weighted.
Let's key in on the three largest printer manufacturers:
Data to June 18. All figures percentages, except PEs, PEGs, and D/E.
3D Systems has the most diverse offerings, and continues to gobble up small companies. Just last week it bought Phenix Systems, a manufacturer of Direct Metal Selective Laser Sintering 3-D printers. Its product line is heavy with plastics 3-D printers, so this should be a good complement.
3D Systems is the only one of the three that's current profitable on a GAAP basis. Estimated EPS growth next year and the next 5 years is 24% and 16.5%, respectively. With a 107 trailing P/E and 2.7 5-year PEG, the stock is pricey. Keep in mind the forward P/E and PEG are based on estimates, and that the company has exceeded past estimates. If it does so going forward, that 5-year PEG of 2.7 will be overstated.
Stratasys is more heavily focused on commercial printers, though also has consumer offerings. It merged with Israel-based Objet in late 2012. Estimated EPS growth next year and the next 5 years is 29% and 30.5%, respectively. Stratasys' 5-year PEG indicates it's relatively reasonable priced.
ExOne -- which went public in February -- focuses on high-end ($500,000+) industrial use systems. The stock price has skyrocketed 94% since the IPO, as some view its pure play on industrials (auto, aerospace, etc.) very positively. The company is expected to become profitable next year with a $0.56 EPS. The stock is certainly pricey, though the standout potential exist. Analysts have yet to project earnings going out five years, so there's no 5-year PEG.
As to the others, Arcam specializes in high-end industrial use metal 3-D printers. It can be bought OTC in the U.S. It's very thinly traded. Thinly-traded stocks can be very volatile and easily manipulated. Proto Labs is a service provider, producing protoypes and parts for others. Meanwhile, both Autodesk and Cimatron make design software for 3-D printing and other uses.
II. Inclusion requirements
To be considered for inclusion on this index, companies must meet these requirements:
- Significant business operations in the 3D printing industry.
- Listing on a regulated stock exchange in the form of shares that foreign investors can trade without restrictions.
- Market cap of at least $50 million .
- Average daily trading volume of at least 250,000 in the last three months.
No. 1 indicates there's subjectively, as there's no set revenue percentage that must be generated from 3-D printing.
STOXX Global 3D Printing Tradable Index (STG3DPP)
The index was launched with 10 holdings, and the maximum will be 30. The index is not weighted by market cap.
Five holdings are disclosed:
Dassault makes design software for 3-D printing and other uses. SolidWorks is its 3-D CAD system.
Nos. 2 through 4 are also in the first index, and were previously discussed.
Greatbatch produces medical products and electrochemical products. Greatbatch Medical, a subsidiary, uses 3-D printing for prototyping (and perhaps also producing) orthopedic implants and devices.
And the others?
The others don't seem to be disclosed. However, STOXX provides geographic and subcategory breakdowns -- and, since there are only 10 holdings, it was easy to deduce three additional holdings:
ExOne and Arcam are also in the first index, and were previously discussed.
Faro develops software-based 3-D electromechanical measurement and imaging systems.
Nos. 9 & 10?
Given the category info provided, the two remaining holdings are a U.S. company and a Japanese one. One is likely a business support company and the other an electrical component one.
II. Inclusion requirements
I converted Euros to U.S. Dollars, so keep in mind the dollar figures will vary with the exchange rate.
- More than one percent of revenue must be generated from the 3-D printing sector
- Minimum three-month average daily trading volume of 250,000 Euros ($333,675)
- Minimum free-float market cap of 80 million Euros (about $107 million)
- Company must be listed in a country that is classified as a developed market according to STOXX’s country classification model
ONE percent?! There are few publicly traded pure plays, or even half or quarter plays, so I understand setting a low revenue minimum. However, 1% is ridiculous.
I don't think many are aware of the existence of these indices, so I wanted to bring them to the attention of readers for a couple reasons:
(1) The holdings provide a good starting point for those interested in investing in individual stocks in the 3-D printing realm. While some of the companies are well known, others are surely new names to some.
(2) Some might be interested in investing in ETFs based on these indices when they become available. Investing in individual stocks is often the best way to go. However, investing in an ETF based on one of these indices might appeal to select investors.
There's little doubt that 3-D printing will be a major disruptive technology. That said, the major stocks have high valuations, betas, and short interest. So, they're only suitable for those with higher-risk tolerances.
3D Systems is at the leading edge of a disruptive technological revolution, with the broadest portfolio of 3-D printers in the industry. However, despite years of earnings growth, 3D Systems' share price has risen even faster, and today the company sports a dizzying valuation. To help investors decide whether the future of additive manufacturing is bright enough to justify the lofty price tag on the company's shares, The Motley Fool has compiled a premium research report on whether 3D Systems is a buy right now. In The Fool's report, take a close look at 3D Systems' opportunities, risks, and critical factors for growth. You'll also find reasons to buy or sell the stock today. To start reading, simply click here now for instant access.
BA McKenna 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. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!