3D Printing [Investing] for Dummies
Erin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
3D printing conjures up images of the future. Input an idea, press a button, zap it across the galaxy, and George Jetson pulls it out of a magic box.
What really happens is not that far off, minus the George Jetson, and the galaxy zapping.
3D printing, also known as additive manufacturing, is the process of making a three dimensional solid object from a digital model. The object is created by the printer laying down layer by layer of material (composite), or a “dust” that is then “cooked” in the printer, in just the right dimensions- so high, so wide, so thick. The product or object is not [generally] made of the actual substance the real object would be made of. Obviously the printer cannot create metal or wood, for instance, but it can make a very reasonable facsimile.
The question isn't whether or not 3D printing will change the world, or is it the next big thing. The question is just how much longer until it changes the world? It will change the way business is done the way cell phones have changed communication, or the personal computer changed, well, everything.
Imagine your car breaks down and you need just the right tool to fix it at home. With a 3D printer in your home (yes, this is possible, and not too many years down the road), you can put in the parameters (or better yet, pull up your 3D printer software, or even just punch it in on your phone app), send it to the printer, and voila!, “print” up the tool right there at home. Why not? Jay Leno already does it!
What if you are in a hospital and need a vital instrument, the sooner the better? Or you are in a remote military zone (like an aircraft carrier or a desert) and need an essential part for a jet, and FedEx just isn't going to get it to you overnight, the 3D printer may not make it perfectly (yet- give it a few more years), but it can make it.
Or in more practical applications, you are building a widget, and you just can't figure out how to make the grip, or will the new updated attachment fit just right? The digital mockups look good on screen and on paper, but once you put it into the 3D printer and have the composite mockup in your hand (without having to wait weeks for it to go through a mold assembly), you realize it just doesn't work.
The question isn't whether or not investing in 3D printing will be a good use of investment funds. The question is which company will give you the best return, and how long you are willing to wait.
Stratasys (NASDAQ: SSYS) is engaged in the development, manufacture, marketing, and servicing of 3D printers, rapid prototyping (RP) systems, and related consumable materials for office-based RP and direct digital manufacturing (DDM) markets.
The company is in the middle of a merger with Israeli manufacturer and rapid prototyping company Objet. The combination of the two companies will create a major force in the 3D printing (or rapid prototyping) world. The excitement of the merger led to a spike in the share price that has since reversed and settled down.
Stratasys reported record revenue of $49.4 million for the second quarter, a 31% increase from the $37.8 million for the same period last year. The company reported net income of $3 million for the quarter, or $0.14 per share, compared to net income of $4 million, or $0.18 per share, for the year previous.
System shipments totaled 1,598 units in the first half of 2012, compared to 1,302 units for the same period last year.
The stock is currently at $58.68, with a price to earnings ratio of $65.75.
3D Systems (NYSE: DDD) is a provider of 3D content-to-print solutions including personal, professional, and production 3D printers, integrated print materials and on-demand custom parts services for professionals and consumers alike. 3D Systems isn't just in the business of changing the future with 3D printing, but also manufactures everyday use products. The company announced a new iPhone 5 case last week.
3D Systems boasts an impressive list of clients, including Ford (NYSE: F) and Medtronic (NYSE: MDT). Medtronic's diabetes [management] automation strategy team uses 3D printing to rapidly create new product concepts, tooling, rapid prototyping, packaging and training tools. The 3D Systems product became so popular that the company ordered a second one to be used in the research and development department.
Companies like Ford, Porsche, and DaimlerChrysler (all on the 3D Systems roster) have huge R&D budgets, larger than the total sales for a company like 3D Systems. All manufacturing companies, whether they be medical, aviation, automotive, etc., rely heavily on prototyping. It is a matter of having an effective sales team, and advanced and affordable products, that will determine which of the companies emerges as the leader in this field.
The company enjoyed a revenue increase of 52% to $83.6 million in the second quarter. The company reported growth from all its revenue categories, led by a 112% increase in its printer units sold. Demand is high for the company's products and services, evidenced by a $12.3 million backlog at the end of the quarter. Gross profits grew 71%. The company had $158.5 million available cash at the end of the second quarter.
The stock is currently at $35.07, with a price to earnings ratio of $60.77. 3D Systems’ market cap is $2.12 billion. Overall the stock has skyrocketed an incredible 126% over the past 52 weeks. The company is listed on Fortune’s Fastest-Growing Companies for 2012.
There is a downside to 3D printing and that lies in the intellectual property laws similar to what record companies faced over the last decade. Consumers will soon have (if they don't already have) the ability to reproduce a copyrighted or trademarked product. And just like with the music industry, the problem won't be with the printer itself (or in the music industry's case, the CD burner, or the software that copies and shares music), it is what people do with it. Illegal replication of a proprietary or protected design that is sold or used for commercial use inevitably will become an issue for the 3D printing industry. It is not yet an issue. But individuals looking to heavily invest in 3D printing will want to keep an ear to the ground to see if this issue potentially arises.
No stock is perfect, but some stocks are a lot closer to perfect than others. The 3D printing industry promises to go a long way toward improving your long-term investing success and in sifting out the best investments from the rest.
Beam me up, Scotty!
ErinAnnie has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. 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.