Toward the end of 2011, I continuously said “short DDD.” My reason was due to valuation, as 3D Systems Corporation (NYSE:DDD) was among the best performing and most expensive stocks in the technology space. Yet after a steep pullback in March, my outlook changed, as I said to buy the stock. Now after earnings, I am very optimistic, and say that 3D Systems is a necessity to the portfolio of technology investors.
A Look at 3D Systems’ Quarter
For the quarter, 3D Systems Corporation (NYSE:DDD) saw revenue of $102.1 million for growth of 31% year-over-year (yoy). The company’s most impressive segment was printer sales (no surprise), which grew an impressive 61% with 22.10% being organic growth. The company also achieved growth from new products, returning $38.3 million in this category, which was up 60% yoy. In addition, the company also saw greater demand in both Europe and Asia, as these two regions stole market share from North America.
Overall, 3D Systems Corporation (NYSE:DDD) is the most diversified company in the rapidly growing 3D printing space. It has gross margins of 52.4% and continues to see the greatest revenue growth in its 3D printers. I also believe that because of its presence on three continents that it becomes an attractive acquisition target to those companies looking to build a 3D printing business. Also, in terms of valuation, it is the cheapest, therefore aiding in its investment outlook and attractiveness as an acquisition target.
Industry & Investment Outlook
|3D Systems||Stratasys, Ltd. (NASDAQ:SSYS)||ExOne Co (NASDAQ:XONE)|
|Market Cap (millions)||$3,500||$3,200||$500|
|Forward P/E ratio||29.78||34.50||58.00|
In my opinion, ExOne doesn’t fit into the conversation as a comparable company in terms of investment opportunity to either 3D Systems Corporation (NYSE:DDD) or Stratasys. While ExOne is promising and does operate in the 3D printing space, it is too small, its premium is too high, and it’s nowhere near reaching the efficiency of either 3D Systems or Stratasys, Ltd. (NASDAQ:SSYS). ExOne Co (NASDAQ:XONE) fits into the speculative realm with just $28.66 million in revenue over the last 12 months.
When you look at 3D Systems Corporation (NYSE:DDD) compared to Stratasys you should see two fast-growing companies that are leaders in a highly promising industry. For this fact, you have to award a higher premium to invest. These are established $3 billion plus companies that have been noticed by the market and therefore a PEG ratio that is 30% greater than the “true value” of 1.00 should be expected, and is tolerable when choosing to invest in a growth industry such as 3D printing.