Should You Buy Into 3D Printing?
Howard is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Beginning in the late 1980’s, 3D printing has been around much longer than most people think. Over the past few years advances in technology, decreased costs, and larger demand has brought 3D into the eyes of investors. 3D printing is providing lots of hype, with potential uses in many industries including aerospace, automobile, construction, and maybe even medicine. With only a handful of public companies now is a good time to get in on the hype of 3D printing. Revenue from the industry comes from manufacturing products in-house, building printers for customers, services on printers, selling materials, and now even manufacturing personal printers. Forecasts suggest that by 2016 3D printing could be a $3 billion industry, growing at about 15% each year.
The name says it all. 3D Systems (NYSE: DDD) is one of the leading innovators of the 3D printing revolution. In 1986 3D Systems founder Chuck Hull developed and patented the system of stereolithography. Twenty seven years later 3D is now a growing company with a market cap over $3 billion. 3D offers both professional and individual household printers. They just launched their first personal printer, The Cube, in 2012 which sells for around $1,300 each. In 2011 3D posted revenue of $230 million, up from $160 million in 2010. EPS follows the same trend, increasing from $0.44 in 2010 to $0.72 in 2011. 2012 Q4 earnings are scheduled to be released on the Feb. 25, but analysts are expecting the trend of increased revenue to continue. Trading at around 99 P/E, buying 3D is an expensive purchase right now, but 3D is currently the leader of the market and is still generating momentum by targeting households and small businesses to buy their products.
Founded in 1989, Stratasys (NASDAQ: SSYS) manufacturers in-office prototyping and digital manufacturing printers for various companies. Stratasys represents the other side of the 3D printing market by supplying large industrial companies. Like 3D Systems, Stratasys has been increasing revenue and EPS for the past few years. In 2010 revenue was $117 million and EPS was 0.45 per share. In 2011 revenue and EPS were $155 million and 0.99, respectively. Earnings will be released in early March, but 2012 should be another year of growth. Stratasys management has also done a good job, with the company holding zero debt as of the latest quarter, something 3D does not have. In December of 2012 Stratasys merged with Israel-based Objet Geometries. Objet has almost 50 patents revolving around 3D printing. Objet offers a large base of 3D printers to add to Stratasys and access to markets in the Middle East and Asia. The $121 million in revenue that Objet brought in in 2011 also will help Stratasys catch up to 3D Systems.
Last week 3D printing company The ExOne Company (NASDAQ: XONE) went public, raising around $90 million. ExOne is an upstart company that has only earned $18.6 million in the past twelve months. In 2012 ExOne sold a total of five printers that specialize in metal printing. Each printer sells for between $800,000 to $1.5 million, and currently ExOne has six printers in its backlog. What might be most impressive about ExOne is its list of customers, which include Deere, Caterpillar, Boeing, and Ford. It is too early to tell how successful ExOne could be on a large scale, but they have a niche in the 3D market by providing large metal printing, which could have plenty of potential for growth.
The Bottom Line
Now is a good time to get into the 3D printing market; with such few companies you can easily invest in the whole market right now. The three companies listed above all have potential for growth while still being leaders in the industry and not overlapping too much in each of their markets. Risks include if the 3D printing industry does not grow as expected, as well as the threat that new companies with better technology come in and disrupt the market. DDD and SYSS, however, are solid enough in the market right now to be able to roll with whatever comes their way. I will be adding these three companies to my CAPS page to track them until I am able to put money into this market.
Hjcranford has no position in any stocks mentioned. The Motley Fool recommends 3D Systems and Stratasys. The Motley Fool owns shares of 3D Systems and Stratasys and has the following options: Short Jan 2014 $55 Calls on 3D Systems and Short Jan 2014 $30 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!