The Next Intuitive Surgical?
AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Companies put out heartwringing videos all the time to show their compassion as well as showcasing products, but rarely have I seen one as touching as the Stratasys video about a two year old, Emma, who has an upper body cast that allows her to use her arms thanks to the 3D technology used at her hospital. Stratasys (NASDAQ: SSYS) is the pioneer and leader in 3D printing technology and prototyping. What does all this mean for possible investors and stockholders? Could a 3D printing company with its amazing medical and industrial innovations be the next Intuitive Surgical?
First Mover Advantage
Like Intuitive Surgical created huge gains for early investors, 3D printing companies are disruptive game changers and buyers will want the first movers among them. There are several to choose from: 3D Systems (NYSE: DDD), Stratasys, and Proto Labs (NYSE: PRLB) .
Stratasys has been a huge mover, up over 157% in 2012. It just completed its merger with Israeli 3D company Objet to make it the biggest among the 3D names. Their most exciting applications are for military, aerospace, automotive, and medical. It has some important deals with Ford, Kor EcoLogic to make the coolest car ever (besides the DeLorean), and NASA. They make a desktop printer, the Mojo3D which goes for $185 a month.
Stratasys, not been content to rest on thermoplastic laurels, added onto the 2011 acquisition of Solidscape for its wax casting, the merger with Objet is expected to create immediate synergies. Stratasys hit a 52 week high on the first day of trading in 2013. It trades at a P/E of 95.91, however, but the last earnings release in November was very positive shipping 52% more units than 3Q 2011 for a 24% increase in revenues. It did guide lower for the rest of 2012 impacted mostly by Objet merger expenses.
Founder and Chairman, Scott Crump, credited as the inventor of Fused Deposition Modeling, was just inducted into the Industry Week magazine’s Manufacturing Hall of Fame. Stratasys has over 500 patents and has the largest variety of 3D printing materials available. Important because it's not enough to have the machines, but also the widest variety of materials to keep expanding addressable markets.
Also attractive to the stock market is that the company has no debt. Caveats include an 11% short interest (nothing compared to the short interest in 3D Systems) as shorts feel it's already run big. Still, analysts conservatively expect 25% plus growth per year for the next five years.
Is Triple D A Triple A Stock?
Competitor 3D Systems is no slouch either. It offers the Cube printer, priced for the mass market at between $1,000-$1,300 dollars. It is a small scale printer and consumers could consider it the new toy of 2013. Here's how it works (Click on the shoe video). Already consumers are creating objects to sell. As an example, Shapeways.com is a seller of these items and there are some amazing products. Of course, it also has the larger scale industrial units.
On 2013's first day of trading 3D Systems moved up 4.55% to close at an all-time high. It is the oldest of these three founded in 1986 when founder Chuck Hull patented stereolithography. 3D also has prestigious customers such as Porsche, Lockheed Martin and Johnson Controls.
Sporting a similarly high multiple of 81.91 3D may be less attractive as it does carry debt, possibly justifying a 42.50% short interest, but that may also be attributable to its larger run up of 247% in 2012. Its forward P/E of 35.53 does indicate a company growing earnings but not as quickly as Stratasys as analysts only expect a 14.00% five year growth rate.
The New Kid On The Proto Block
Proto Labs only debuted last winter and its share price movements have made for a wild ride, frequently moving sharply from $28 to $40 and back down again. It is a very volatile stock but analysts expect the most five year growth of these names for Proto Labs at 30% per annum. It also has a lower P/E at 47.82 even at close to its all-time high. The forward P/E is 30.80. While it's not debt free it has very little debt at $736,000 to $57.99 million in cash.
The difference between Proto labs and its more established competitors is that Proto Labs manufactures the small parts by 3D printing rather than selling the 3D machines and necessary materials. It also deals mainly with smaller companies who just need "Real Parts, Real Fast" which is their motto. Not only can small developers submit the design for a part but Proto Labs can suggest improvements and then get it back to them in one shipping day. It is competing against Stratasys' RedEye division which features 130 On Demand facilities globally that can manufacture parts as physically close to the client as possible.
Proto Labs is trying to keep up with Statasys as in a recent press release they're offering more materials to customers. “We’re excited to announce the addition of these high-performance resins to our Protomold service,” says Brad Cleveland, President and CEO. “These additional materials complement the hundreds of existing engineering-grade resins we currently offer, and allow us to make a wider variety of parts for our customers.” And repeat customers are the name of the game for this small cap niche manufacturer with strong response from them contributing to 80% of top line numbers.
It's A World Da Vinci Would Love
For other amazing 3D products click so you can the capabilities and possibilities for yourself: in textiles a 3D bikini, a bicycle, and of course my personal favorite, chocolate. The public is still overwhelmingly unaware of the possibilities of 3D printing although they are increasingly found in schools. With public awareness gradually growing the big moves are happening now just as they did for Intuitive Surgical only a few short years ago. As I wrote before in November that these companies reminded me of a nascent Intuitive Surgical with its technological moat, due diligence will require keeping up on the industry to see that these three companies are maintaining their current moats.
leglamp has no positions in the stocks mentioned above. The Motley Fool owns shares of 3D Systems, Intuitive Surgical, and Stratasys and has the following options: short JAN 2014 $55.00 calls on 3D Systems and short JAN 2014 $30.00 puts on 3D Systems. Motley Fool newsletter services recommend 3D Systems, Intuitive Surgical, Proto Labs, 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!