Why “Drill, Baby, Drill” When You can “Print, Baby, Print?”
Robert is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Many have profited, and continue to profit, from US oil and natural gas investments spurred by hydraulic fracturing. Look at shareholders of Cabot Oil and Gas; their stock went up 10% in one day on a good earnings report. Demand for oil and natural gas will persist for years and money will be made on it. However, I believe the emerging technology of 3 dimensional printing could smoke oil and gas investments in the future.
Consider one leading 3D printing company, 3D Systems (NYSE: DDD). By now you have no doubt seen 3D Systems’ latest earnings report, and what a doozie it was:
Gross profits up 69% over 2011 results.
Revenues up 57%
Diluted earnings per share, up 78%
Sales of printers, excluding Cube printers, up 123%
Gross profit margins, up 350 basis points to 51.8%, a quarterly record.
Strong revenue growth in all business segments
Stronger than expected sales of Cube personal printers
No surprise that 3D Systems raised its full year guidance for FY2012 earnings. No surprise either that the stock sells at almost 63 times earnings (but a PEG of 2.61) and appreciated 162% in the past year. What I like is the $44 million in cash raised for the first three quarters of the fiscal year, a debt to equity ratio of 0.37 and $1.7 million spent on research and development.
Good news for shareholders? Absolutely. A surprise? Maybe not. The 3D printing industry is, in many ways, just starting to gain traction and I believe the best is yet to come. Consider:
General Electric (NYSE: GE) has teamed up with France’s Snecma to produce a new generation of turbine jet engines that are 30-40% lighter than current models. This improvement will come almost exclusively from 3D printing of engine components.
SelectTech Geospatial, a private company serving the aerospace and defense industry, recently built a drone aircraft in two weeks for $5000 rather than six weeks and $30,000. Using 3D printers from Stratasys (NASDAQ: SSYS) made it possible.
KOR EcoLogic joined Autodesk (NASDAQ: ADSK) software with Stratasys printers to design and build a 200 mpg car featuring a car body manufactured entirely by 3D printing. See this very cool car here. If you want a really small toy car, you can get one of those printed, too.
Objet Ltd, soon to be merged with Stratasys, can print a full sized car dashboard. The thing is five feet wide, fully functional and incorporates multiple materials.
And speaking of Stratasys and Objet...
With an estimated 41% market share, Stratasys isn’t exactly huffing and puffing trying to keep up with 3D Systems. The company enjoys 30% revenue growth yoy, a gross profit margin of 52.9%, and generally increased earnings. It records no debt. It’s next quarterly report is imminent and expectations for noticeably improved earnings are high. With a PE of 76, let’s hope earnings don’t disappoint.
Both 3D Systems and Stratasys have been aggressively making acquisitions, with the SSYS/Objet merger making perhaps the biggest splash. If the Israeli government can please complete its review, this merger might finally happen. The merged company promises to be a powerful combination of Stratasys manufacturing assets with Objet’s rapid prototyping expertise.
Autodesk designs software for 3D printing and leaves the actual printing to someone else. The company is doing OK, but for the past year has underperformed the S&P 500. Over the past six months in particular the stock sank 24% from its 52 week highs. In short, the company electrifies few.
One last consideration for 3D printing companies: Dassault (NASDAQOTH: DASTY.PK). Based in France, the company provides 3D printing related software, engineering and marketing services. Dassault is roughly 10 times the size of 3D Systems and Stratasys by market cap and sells at a PE of 32. So, are investors frantically buying this French 3D printing software/engineering firm in the midst of the current European recession? Well, one chart is worth a thousand words.
Chart courtesy of The Motley Fool
Bottom Line
“Disruptive technology,” “game changer” and “the end of ‘Made in China’” have all described 3D printing technology. The technology and its potential certainly excites investors. Some believe 3D printing will find its way bigtime into homes like “regular” printers have. I don’t buy it. I think the big growth in 3D printing will be in rapid prototyping, small manufacturing production runs, manufacturing intricate or specialty parts not amenable to traditional methods and creating high quality molds for injection molding. DDD and SSYS offer great ways to profit from this exciting technology. As mentioned above, you can make money off the growing US oil and natural gas industry; but why go to the oil patch when for eye-popping jaw-dropping gains, the real American growth story lies in 3D printing.
dylan588 owns shares of 3D Systems, Stratasys, and General Electric Company. The Motley Fool owns shares of 3D Systems and General Electric Company and has the following options: short NOV 2012 $35.00 calls on 3D Systems. Motley Fool newsletter services recommend 3D Systems and Stratasys. 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.If you have questions about this post or the Fool’s blog network, click here for information.
