This series , brought to you by Yahoo! Finance, looks at which upgrades and downgrades make sense, and which ones investors should act on. Today, we turn our focus to investment megabanker Credit Suisse, which this morning initiated coverage of the 3D printing industry — and spread the whole gamut of possible ratings out among the three major players: ExOne Co (NASDAQ:XONE), Stratasys, Ltd. (NASDAQ:SSYS), and 3D Systems Corporation (NYSE:DDD).
Let’s start with Credit Suisse’s most pessimistic note, and we’ll move up from there.
Beginning at the bottom: ExOne
ExOne Co (NASDAQ:XONE) is Credit Suisse’s first pick in the 3D-printing industry — and it’s picked to “underperform” the market. Priced at more than $51 per share today, Credit Suisse sees ExOne Co (NASDAQ:XONE) shares falling to $48 the next year.
Focusing intensely on the industrial market, and leaving consumers to its rivals Stratasys, Ltd. (NASDAQ:SSYS) and 3D Systems Corporation (NYSE:DDD), ExOne Co (NASDAQ:XONE) says its process for 3D parts-printing offers the fastest volume production of anyone out there. In return, ExOne also charges prices far in excess of what its rivals’ cheaper machines cost — $100,000 and up, to as much as $1.4 million per unit for ExOne Co (NASDAQ:XONE)’s top-of-the-line S-Max printer. Unfortunately, ExOne’s shares look almost as pricey as its products.
ExOne is nprofitable today, and selling for 82.5 times next year’s projected earnings (versus upper-30s P/Es for Stratasys, Ltd. (NASDAQ:SSYS) and 3D), making it easily the most expensive 3D-printing stock out there today. Granted, investors are probably paying so much because the company’s growth prospects seem so bright — analysts quoted on S&P Capital IQ have ExOne pegged for wildfire 71.5% annual profits growth over the next five years. 3D Systems Corporation (NYSE:DDD) and Stratasys, Ltd. (NASDAQ:SSYS), in contrast, are both expected to grow less than half as fast — 28% and 30% annually, respectively.
Still, with ExOne Co (NASDAQ:XONE) unprofitable today, and burning cash to boot, investors should take projections of the company’s profits “growth” with a few grains of salt. If you’ve passed fifth-grade math, you probably remember that any time you “grow” a negative number, it just gets more negative.
Moving on up: Stratasys
Looking up one rung on Credit Suisse’s ladder of respect, we find Stratasys, Ltd. (NASDAQ:SSYS) initiated at a “neutral” rating, and a $103 price target.
On the one hand, calling Stratasys “neutral” appears to do the company an injustice. The stock costs less than $96 today. Shouldn’t the prospect of a move 7.5% higher justify a “buy” recommendation?
However, Stratasys, Ltd. (NASDAQ:SSYS) looks rather expensive, too. It carries a cheaper “forward” P/E ratio than does ExOne, but here in the present, Stratasys is just as unprofitable as is ExOne — and it’s actually burning more cash than its upstart rival.
Over the past year, Stratasys posted negative free cash flow of $28.3 million, which is more money than it admitted to losing under GAAP accounting standards, and more than twice the $11.2 million in free cash flow that ExOne burnt.