An Under the Radar French 3D Printing Company
Ryan is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The dawn of the 3D printing era is upon us. These nifty devices are going to revolutionize so many aspects of our our lives. But most of the investing focus is concentrated on domestic 3D printing powerhouses: 3D Systems (NYSE: DDD) and Stratasys (NASDAQ: SSYS). But many investors aren't aware of a French 3D printing company called Dassault Systemes (NASDAQOTH: DASTY).
Explosive growth all around
The 3D printing revolution is in its infancy. All three companies have been reporting astonishing growth that shows no signs of slowing. Each of these companies has reported record revenues in each of the last three years. Take a look:
|2012 Revenue||$353.63 M||$215.24 M||$2.66 B|
|Revenue 3 year CAGR||30.3%||22.24%||7.8%|
|2012 Diluted EPS||.71||.36||4.17|
|Current P/E ratio||99.73||146.76||50.99|
|2012 Operating Cash Flow||$53 M||$1.49M||$699.63M|
The 2012 OCF number from Stratasys was a bit of an anomaly. Its average for 2011 and 2010 was roughly around $20 million.
I realize that 3D printing is a high growth industry, the kind where P/E ratios don't really mean much. However if I'm buying a company in an explosive growth industry, I don't think the one with the lowest P/E ratio is a bad way to go.
Additionally, Dassault has proven that it can generate cash on a level exceeding that of its American counterparts. Dassault has not been growing revenue as fast as 3d Systems or Stratasys. Part of this is due to the weakening euro. The three year revenue CAGR in euros was 9.1%.
Diversity is good
If a company has an incredibly culturally diverse staff, you can bet it probably has a wide variety of mindsets at its disposal to solve the challenges it faces. At the end of 2012 Dassault had 8,101 employees in 37 different countries who combined represent 105 different nationalities. Stratasys has offices in seven different countries (I counted the PRC as one country). Counting the United Kingdom as one country, 3D Systems has offices in 10 countries. Diversity edge: Dassault Systemes.
For the two American companies, the region they grew revenues at the greatest rate in 2012 was Asia. Stratasys and 3D Systems grew revenue in the region by 64.8% and 92.5% respectively. Over at Dassault Systemes Asia was also the region that experienced the most revenue growth, but the number was only 20%.
Those numbers might make Dassault look unimpressive, but before you judge take these facts into account. Dassault still recorded over ten times more revenue in the Asia region than either of its American counterparts. In the Americas, it currently generates more than three times as much revenue as 3D Systems or Stratasys.
Don't let the lower revenue growth rates of Dassault fool you. It is nearly impossible for a company generating so much more in revenue to achieve greater growth rates than its smaller adversaries.
Margins for 3D printers
Looking at revenue growth is all well and good. But more importantly you need to know how efficiently the company you are looking at is converting sales into profits. There are plenty of margins out there that can give you clues to the answer of that question.
Two that I prefer are EBITD and net profit margin. In the following table I've compared those ratios for these three companies. I've also included return on equity, another highly reliable measure of efficiency.
|Net Profit Margin (TTM)||10.2%||(4.2%)||16.59%|
|Net Profit Margin 5 year avg||8.9%||8%||15.34%|
|EBITD Margin (TTM)||23.8%||(2.6%)||30.64%|
|EBITD Margin 5 year avg||9.71%||19.95%||28.62%|
|Return on equity (TTM)||9.7%||(1.32%)||14.5%|
|Return on equity 5 year avg||10.01%||3.92%||14.54%|
Margin figures for DDD and SSYS came from fool.com, DASTY margins and ROE figures for all three companies came courtesy of Reuters.
First Dassault kicks the Americans' butts in terms of diversity, and now margins too? Looks like it. Dassault has margins that crush the competition. America is better than France at many things, but it doesn't look like 3D printing is one of them.
Final foolish words
3D printing is going to change the world in ways that many of us can't even fathom. It's not just a passing fad, we have a legitimate technological revolution on our hands. Many American investors are very aware of this and as such are investing in the two domestic 3D printing giants, 3D systems and Stratasys. In doing so they may be allowing an excellent company from France, Dassault Systemes, to fly under their radars.
Dassault Systemes has not, and most likely will not, be able to grow at the rate of 3D Systems or Stratasys. The main reason for this is that Dassault already generates much more revenue than its American counterparts. However, when it comes to diversity and margins Dassault is the clear cut winner. Compared with either of the Americans, Dassault has operations in over three times as many countries. In terms of return on equity and just about any margin you can think of, Dassault has been the best performer. Taking all of that into account, if you are thinking about buying 3D printing stock, I would consider Dassault Systemes.
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Ryan Palmer 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 $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!