Finally, A Game Changer!
Piyush is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
3D Systems (NYSE: DDD) provides printers that have the capability to print 3D models. Using raisins and other synthetic materials, the printer can make real life 3D prototypes of any model depending on the user’s wish. The technology is fairly new, but could very well be the next big thing.
The printer allows the user to develop a computer generated prototype before going all in with the production. Also prototypes that were earlier made by hand can now be created within an hour’s time, with precise measurements and finishing. Up till now 3D printers were used by architects, engineers and designers for work purposes, but 3D systems has taken the technology a notch further by providing printers that can be used in any household.
A couple of months back, the company changed the industry altogether with the introduction of its home 3D printer “Cube”. The 3D printer offered by the company costs $1299 and comes bundled with a 3D modeling software. The base configuration allows the user to replicate anything that measure up to 5.5” x 5.5” x 5.5”. The machine has limitless domestic uses and the level of productivity of the product depends solely on the imagination of the user.
3D Systems has already found an industrial customer for itself, Apple (NASDAQ: AAPL). The company would be providing protective covers for the latest iPhone. Apple’s iPhone has been received positively by the users as well as by investors. This order could just be the beginning of a new era, as more people would like to customize the look of their newly purchased classy smartphone. Apple’s 3D covers are available at many online stores online which have received an overall good review.
Talking about a speculative reason, many believe that 3D Systems could be a very good takeover target for Apple, as the latter has a history of revolutionizing technology. First computers, then music players, smart phones and then tablets, and now who knows Apple might think that it is time to use its $117 billion cash reserves to again change the world.
3D System's quarterly revenues increased 52% and its net profit margins saw an upside of 71%. The company expects the year on year growth in revenues at the end of the current fiscal year, to be around 34%. Overall the company saw a growth of 242% in the number of units sold compared to the previous year. Overall the results exceeded the market expectations as both topline and bottomline surged.
The only competitor of 3D Systems in the 3D printing industry is Stratasys (NASDAQ: SSYS). These two companies are the only prominent players in the 3D printing market, and any growth in the industry would be reaped by these two companies. Let's take a look at the financial metrics of the two companies.
|
Company |
P/E |
EPS growth expected next yr. |
Quick ratio |
P/FCF |
|
3D Systems |
59x |
24.5% |
3.18 |
48.68 |
|
Stratasys |
63.4 |
18.5% |
2.6 |
94.56 |
The valuations of the two competitors look ridiculously high. However 3D Systems has a higher quick ratio along with a lower price to free cash flow and analysts believe that the EPS growth rate for 3D Systems would be higher than Stratasys'.
Taking a look at the comparative performance of the two competitors from YTD gives 3D systems the lead in terms of stock returns.
3D Systems looks well poised to take advantage of the growth opportunities presented by the industry. I firmly believe 3D printing could be the next big thing, with or without Apple. The financials support the growth story, and it is due to these reasons that I believe that the stock could head north.
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PiyushArora has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple and 3D Systems and has the following options: short NOV 2012 $35.00 calls on 3D Systems. Motley Fool newsletter services recommend 3D Systems, Apple, 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.
