Sector Analysis: 3-D Printing

3-D printing (sometimes referred to as additive manufacturing) has taken the world by storm recently, with technology that could change the world as we know it- while also making huge profits for investors. In this article, we will explain what 3-D printing is, and then look at some companies involved in this exciting, volatile sector.

3-D printers work in a remarkably simple, yet robust, fashion. First, the object to be created, or "printed", is digitally modeled using CAD (computer-aided design) software. Once a digital model has been created, it is sent to the 3-D printer, which analyzes the model. The printer then creates the object by depositing layer after layer of material, usually plastic. As each layer cools, it becomes a solid base for the next layer. Basically, objects are divided into many cross-sections that are then printed separately. The cross-sections are fused together, creating a physical representation of the digital model. 

Obviously, 3-D printing has many distinct advantages over conventional manufacturing methods. Since the 3-D printer prints from a digital model, objects can be made to the specific consumer's design specifications. No longer will you have to settle for a standardized size, or have to wait for a costly custom component to be shipped. The ability of consumers to generate objects by themselves, for themselves, will revolutionize the modern world. Another benefit of 3-D printing is that, by creating the object without having to sand, drill, or cut away materials (this will be explained further in the next paragraph), costs can be kept lower. A final advantage of 3-D printing is that it is relatively safe compared to other manufacturing methods. The lack of drills, saws, welders, and other dangerous tools makes 3-D printing quite harmless.

 3-D printing is different than most manufacturing techniques in that it is additive, rather than subtractive. Normal manufacturing techniques involve the removal, or subtraction, of materials (i.e. cutting, sanding, and drilling), while 3-D printers deposit, or add materials. By being an additive process, 3-D printers save materials, and therefore money, over conventional manufacturing methods. Furthermore, while subtractive manufacturing generates waste in scraps and dust, 3-D printers avoid this. Due to this, in the long run 3-D printers will increase landfill space while also decreasing respiratory illness in factories.

The 3-D printer sector is one of the most volatile, and potentially profitable, sectors in the market today. It is not uncommon for stocks within this sector to move as much as eight percent in one day, presenting an exciting opportunity for investors to make - or lose - large amounts of money. Now, we will examine some major players in the sector.








3D Systems Corporation (DDD) 

 

3D Systems Corporation (DDD) is the oldest, and largest, 3D printing company as of today. Founded in 1986, the company now has over a thousand employees, and revenue of $230 million. Cubify, a line of low-end printers meant for consumers, is now sold in Staples. 3D Systems is one of the most well known 3-D printing companies, as well as one of the only to make a profit. Their stock is certainly impressive- up 111.6% since last year, and 268% since its IPO. It has risen by 29.9% in 2013. The forward P/E is 35.74, versus a trailing P/E of 105.21. There is a quarterly revenue growth of 31%. However, earnings have gone down somewhat, with quarterly earnings decreasing by 4.9%.  Also worth mentioning is the 50.66 million dollars in debt, and the 110.54 million dollars in cash, the company possesses. All in all, DDD is a solid performer that has shown exceptional growth in the past. While this stock is less risky than the others, in the upcoming years the rate of growth, and therefore earnings for investors, may start to slow down.

Stratasys (SSYS)




Another major player in the 3-D printing sector is Stratasys. Founded a mere three years after DDD, Stratasys has 530 employees and earned 155.89 million in revenue (2011). While its products were limited to high-end applications in the past, the recent acquisition of Makerbot for $400 million in cash and stock options, a startup involved in desktop 3-D printing, has secured a place for Stratasys in the consumer market. SSYS has been on the market for far longer than DDD, with an IPO in 1994. Since then, it has increased in price by 5,337.7%! Growth hasn't been as fast lately, with a yearly increase of 85.32%. However, the numbers are extremely encouraging. There is a forward P/E of 35.57 (no trailing P/E could be obtained), and a quarterly revenue growth of 116.2% - in other words, it more than doubled. Stratasys has $140.88 million in cash - and no debt. No data on the quarterly earnings growth could be obtained. Stratasys is similar to 3D Systems - it is a large, established company that may not have much more room to grow. However, 3-D printing is an emerging technology and it is possible that Stratasys could bring huge profits to investors.

Ex One Corporation (XONE)

Ex One is weird. While most of the other companies listed are somewhat consumer-oriented, it instead focuses on high-end industrial applications. In addition, Ex One also provides a service to individual consumers by printing designs for them (for a fee). Two major differences between XONE and other companies are the printing materials used, and the size of printers. While other companies exclusively print in plastic, XONE printers can print in plastic, sand, glass, and even metal. This allows for a greater range of applications. XONE printers are also much bigger than those of its competitors, with the largest one measuring (). XONE is a more recent company, with their IPO in February. Since then, the stock has grown by 142.16%. Their IPO was quite pricey, at $18. Even with such an expensive IPO, the company has still managed to double in size. Quarterly revenue growth is at 191.5%. However, even with such a large increase in revenue the company is still losing money, with a profit margin of -31.2%. While XONE has the potential to grow at an extremely fast rate due to it being one-of-a-kind with metallic 3D printing, it will have to compete with other, larger companies such as 3D Systems and Stratasys. Additionally, if sales do not pick up and the company continues to lose money, investors could suffer greatly. 

Xerox Corporation (XRX) 

Xerox, the once mighty printing company, is now involved in the 3D printing sector with an exciting new idea- printable electronics. The ability to print electronic circuits would revolutionize the manufacturing world, and could reestablish Xerox as a mighty cornerstone company. As this technology is experimental and has not been implemented yet, it is not worth it to analyze Xerox's stock. Investors should look out for this stock in the future, as it could potentially explode in price.

Organovo (ONVO)

We will end this list with Organovo, a company that specializes in a completely different field than the others-bioprinting. Unlike most companies, it is part of two major sectors: 3D Printing and Biotech. The printing of stem-cells in order to form organs is a revolutionary technology that could save countless lives. Imagine how many people die waiting on the transplant list. All of those deaths could be avoided. While this technology is extremely exciting, it has not come to fruition yet. Organovo is still a development stage company, that may soon bear results. They recently completed the printing of a working human liver, and expect to market their products as early as 2014! Even though Organovo does not currently have any products, the hype and excitement alone is enough to boost its performance as it was changed from the OTC Markets to the NYSE. Its stock has shot up 50% in the last week.

Disclaimer: Trading stocks has extremely high risks, and should not be taken to lightly without a thorough understanding. This is written from a purely commentary point of view and is not meant to suggest buying, selling, or holding a stock. All traders must do their own research prior to investing. We (StockQuests) are unaffiliated with all of the companies that are mentioned on this blog, and can't be held responsible for any losses that may occur. Invest at your own risk.