Hewlett-Packard's New Best Friend

"Oh, I get by with a little help from my friends,
Mmm, I get high with a little help from my friends,
Mmm, I'm gonna try with a little help from my friends.
Do you need anybody? ..."
-- The Beatles

Well, as a matter of fact, yes. It turns out that Motley Fool Rule Breakers recommendation Stratasys (Nasdaq: SSYS  ) did in fact need a little help. Fortunately, it found a friend this morning, named Hewlett-Packard (NYSE: HPQ  ) .

Over the next few months, Stratasys will begin building an exclusive line of HP-branded 3-D printers for distribution in Europe and, possibly, globally. HP sees the market size in the "millions" of potential customers. Which translates into a lot of growth ahead.

HP ... Hungry!
The numbers speak for themselves. This is a big opportunity for both companies, perhaps dwarfing the potential of HP's recent expansions. Last November, the company made a bid to challenge Cisco (Nasdaq: CSCO  ) and Juniper (Nasdaq: JNPR  ) with its buyout of 3Com. Before that, it was HP's purchase of consulting giant EDS making headlines, as the company forged ahead to try and displace IBM (NYSE: IBM  ) and Accenture (NYSE: ACN  ) as a global IT consultant.

Both moves represented a sharp diversion from HP's traditional market offerings in the personal computer and printer ink spheres. However, the Stratasys agreement appears to be a return to its roots. In reality, it's a game-changer. (Apple (Nasdaq: AAPL  ) and Dell, listen up!)

Hold up a sec. "3-D" printing?
Hmm, I should probably explain what it's all about. Or rather, let me defer to the Fool's own Jack Uldrich. He'll sketch it out for you:

[3-D printing] uses computer-aided-design (CAD) data to help build physical objects layer by layer in three dimensions. In most cases, layers of liquids or powdered plastics are deposited by a printer, then sintered together into a computer-generated shape using ultraviolet light or a laser beam.

So you see, 3-D printing has about as much in common with everyday printing as, well, carpentry has with sketching out a blueprint. 2-D gives you a picture of something, while 3-D gives you the something itself. Stratasys's machines are today's version of the Star Trek synthesizers that let Capt. Picard get his "Tea, hot, Earl Grey."

And thanks to today's deal, HP has just entered the market on the ground floor.

Why smaller is better
Not that you would know it from today's market action. HP shares are up all of 0.5%. Meanwhile, Stratasys is in the stratosphere, spiking 40% higher. But does this level make sense?

Actually, it does. Stratasys says its agreement will catapult it to $500 million revenue within five years -- a five-fold leap from today. Pre-news, analysts were projecting a respectable 16% long-term growth pace in earnings. But if Stratasys hits its target (and if margins remain the same), that rate of growth would more than double to 38% per year. So there's a case to be made that even after spiking 40% higher today, Stratasys remains dreadfully undervalued.

If the revenue growth is really there, we should start to see it soon.

In 3-D.

Which Rule Breakers stock will be the next to skyrocket into the stratosphere? Try out the service for free, and find out. 

Accenture is a Inside Value recommendation. Stratasys is a Rule Breakers selection. Apple is a Stock Advisor pick.

Fool contributor Rich Smith does not own shares of any company named above. The Fool has a disclosure policy.


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