Should You Invest in 3D Printing Companies?
Ishtiaq is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
There are few industries that have grown like the 3D printing industry. The companies operating in this space have delivered stellar returns to investors, and that trend shouldn't change any time soon. At the moment, there are two major players in the 3D printing arena: 3D Systems (NYSE: DDD) and Stratasys (NASDAQ: SSYS) – both of which continue to outperform.
There are also some smaller players in the market that are making big waves like ExOne (NASDAQ: XONE). The beauty of the 3D printing industry is that despite massive growth in the business its two biggest players have yet to directly compete. 3D Systems and Stratasys are currently operating in relatively separate segments and do not compete directly with each other.
For those of you who are new to 3D printing technology, it really is quite fabulous. A machine takes a picture of whatever you want to make and makes the item layer by layer with whatever material you choose. You've probably heard the story of the baby that was saved by the doctor who used a 3D printer to make a stent. It is due to stories like this that many feel this technology is the future.
Growth strategy of 3D
The growth strategy of 3D Systems centers around three key aspects: to increase 3D printer penetration, expand global projects, and strengthen its consumer presence. The company plans on replacing traditional technological methods with more modern ones by the end of this year.
Over the past 2 years, the company has gradually increased its capital expenditure as it tries to expand. Earlier, the company relied on an aggressive acquisitions strategy to expand its operations. However, it now has decided to use a mix of acquisitions and capital expenditures to grow the size of the business.
As a result, the company should be able to maintain a healthy organic growth number over the next three-five years. An important element of the growth strategy is the launch of new products; these products will significantly strengthen the product portfolio.
How Stratasys Plans to Grow
While 3D Systems is focusing on the consumer market, Stratasys is focusing on business customers. The company drives a major portion of its revenues from the sales of 3D printers to a number of businesses. The industry is rapidly adopting 3D printing technology; as a result, the market for Stratasys is growing rapidly.
At the moment, one of the fastest growing pieces of the 3D printing sector is the medical device segment. The use of 3D printing is growing rapidly and a lot of labs and device manufacturers are using 3D printers due to higher levels of precision and efficiency.
Last year, the company merged with ObjectLtd, another 3D printer manufacturer. The merger will start to benefit the company by the end of the year. Stratasys will get substantial cost synergies and accelerated revenue growth.
The story of ExOne
ExOne is a relatively new player compared to the other two heavy weights. The company is currently operating in Asia, Europe and North and South America. Notable ExOne products include the S-Max, S-Print, M-Print and M-Lab. Most of these products are meant for industrial use, and the company has some of the largest printers available in the market.
Another interesting market segment for ExOne is the researchers and educational customers space. M-Lab is particularly designed to be used in labs and it is one of the smaller printers available by ExOne.
There are two sets of customers for the company: industrial customers, requiring ExOne products for rapid prototyping and building molds, and researcher customers, who convert their experiments into reality using ExOne equipment. Industrial customers are a big deal for ExOne while the research piece is still underdeveloped.
3D printing is one of the most attractive industries for investors today. All the companies mentioned here have solid product portfolios and strong business strategies. 3D Printing is still in its infancy, so there is plenty of business for all the major players. Perhaps it's time you took a look at this incredible technology.
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Ishtiaq Ahmed 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!