Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

3D Systems Corporation (DDD), Stratasys, Ltd. (SSYS): An Under the Radar French 3D Printing Company

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 Corporation (NYSE:DDD) and Stratasys, Ltd. (NASDAQ:SSYS). But many investors aren’t aware of a French 3D printing company called Dassault Systemes S.A. (ADR) (OTCMKTS:DASTY).

3D Systems Corporation (NYSE:DDD)

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, Ltd. (NASDAQ:SSYS) 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 Systemes S.A. (ADR) (OTCMKTS:DASTY) has proven that it can generate cash on a level exceeding that of its American counterparts. Dassault Systemes S.A. (ADR) (OTCMKTS:DASTY) has not been growing revenue as fast as 3D Systems Corporation (NYSE:DDD) or Stratasys, Ltd. (NASDAQ:SSYS). 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 Systemes S.A. (ADR) (OTCMKTS:DASTY) had 8,101 employees in 37 different countries who combined represent 105 different nationalities. Stratasys, Ltd. (NASDAQ:SSYS) has offices in seven different countries (I counted the PRC as one country). Counting the United Kingdom as one country, 3D Systems Corporation (NYSE:DDD) has offices in 10 countries. Diversity edge: Dassault Systemes S.A. (ADR) (OTCMKTS:DASTY).

For the two American companies, the region they grew revenues at the greatest rate in 2012 was Asia. Stratasys, Ltd. (NASDAQ:SSYS) and 3D Systems Corporation (NYSE:DDD) grew revenue in the region by 64.8% and 92.5% respectively. Over at Dassault Systemes S.A. (ADR) (OTCMKTS:DASTY) 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 Corporation (NYSE:DDD) or Stratasys, Ltd. (NASDAQ:SSYS).

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, 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 Corporation (NYSE:DDD) 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.

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.
Ryan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article An Under the Radar French 3D Printing Company originally appeared on is written by Ryan Palmer.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.