Why Stratasys Is a Must Buy Stock

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Stratasys (NASDAQ: SSYS) announced the fourth quarter and full year 2012 results on March 4. The stock price jumped by 16% to in the pre-market trading on March 4 after closing at $64.26 on March 1.

Result Analysis

Stratasys reported annual Revenue of $359 million and Non-GAP EPS of $1.49 while the quarterly values stood at $96.4 million and $0.40 respectively. These results reflect annual growth of 30% in revenue and 60% in earnings. Wall Street analysts predicted fourth quarter revenue of $72.2 million and EPS of $0.38.

The major percentage of revenue comes from products and the distribution is almost stable for last two years.

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Growth Driving Factors

Stratasys believes that these results are driven by strong demand for the company’s products worldwide. Merger further increased the competitive advantage of the Stratasys as the combined network has 260 resellers and independent sales agents around the world. Moreover the company invested heavily on research and development and introduced highly promising products like:

  • Objet1000 - The world's most effective large-format 3D printer for industrial scale prototypes.
  • Scholar - Highly affordable PolyJet 3D printer package for academia.
  • ULTEM 9085 - High-performance thermoplastic, for use in its FDM 3D printing process.

Competition Scenario

3D Systems (NYSE: DDD) and ExOne (NASDAQ: XONE) are among the major competitors of Stratasys.

3D Systems fourth quarter results were below the expectations of analysts. The company reported quarterly revenue of $101.6 million. Analysts had an expectation of $103.9 million. 3D Systems stock fell by 9% after the announcement of its results. This company has been growing significantly, but high growth rate raises the expectations too high, leading to a fall if the expectations are not fulfilled.

Although 3D Systems missed analyst’s expectations, it is definitely a buy stock as its strong growth potential promises a high return on investment.

ExOne has recently gone public and raised $95 million. It is currently valued at $230 million based on the offer price of $18. It has a distinct competitive advantage over its competitors as it can print the products in any desired material against plastic printing being offered by many of its competitors. The company has reported net loss over the last couple of years and the growth strategy is highly fluctuating. It seems to be a risky stock to invest for short term investors.

Outlook and Future Strategy

Stratasys has put forward a weak outlook for the Financial Years 2013.

  • Revenue guidance of $430 million to $445 million.
  • Non-GAAP earnings guidance of $1.80 to $1.95 per share.
  • GAAP earnings guidance of a ($0.41) to ($0.16) per share loss

The company is planning to cross-sell its portfolio of complementary additive manufacturing solutions and develop more innovative products that can meet the requirements of its customers in a more appropriate manner. The company is also planning to further strengthen its combined sales network by training the sellers and resellers to market and sell combined products.

Conclusion

Stratasys has developed itself as an attractive investment destination for investors. The company had experienced tremendous growth in last couple of years and the present results have served to highlight its achievements. The competition is increasing and the outlook for the coming year is weak.

These findings suggest that the short term investment perspectives are very bright for the company.


Veena Gupta 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!

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