From The Simpsons episode "The Twisted World of Marge Simpson":
Royce McCutcheon: That's the miracle of the franchise… You'll be on a rocket ride to the moon! And while you're there, would you pick up some of that nice, green moon money for me, Royce McCutcheon?
Homer: No deal, McCutcheon! That moon money is mine!
Shares of 3D Systems
How it got here
For a little while, it seemed like 3D Systems' meteoric run was about to end after its second-quarter earnings appeared to disappoint investors. Despite rapidly growing revenues, the Street had been expecting more, so shares fell for a day before recovering to rise again. Rival Stratasys
Both stocks have been among the absolute best performers on the market over the past 52 weeks, and they have certainly been minting that nice, green moon money for shareholders:
DDD Total Return Price data by YCharts
How far can these two stocks grow? Let's take a look at some key numbers to see where they stand relative to some historical averages.
What you need to know
There's no doubt that these two stocks have gotten a lot of market love, but it's important to consider how much their valuation ratios have grown. A stock that's running away from its historical norms might be one at risk of correction, and both of these stocks are now well above their average valuations for the post-recession period:
|
Metric |
3D Systems Result |
Stratasys Result |
|---|---|---|
| Market Cap | $2.2 billion | $1.4 billion |
| Net Margin (TTM) | 10.3% | 12.1% |
| Free Cash Flow (TTM) | $39 million | $9 million |
| Current P/E | 67.3 | 70.4 |
| 2-Year Average P/E | 36.2 | 58.0 |
| Difference from Average P/E | 85.9% higher | 21.4% higher |
| Current Price to Free Cash Flow | 73.9 | 67.9 |
| 2-Year Average P/FCF | 36.9 | 36.4 |
| Difference from Average P/FCF | 100.3% higher | 86.5% higher |
Source: Morningstar and Wolfram Alpha. TTM = trailing 12 months.
3D Systems has seen more growth in its ratios than Stratasys. Let's look at a graph of these changes to get a better picture of the situation:
DDD P/E Ratio data by YCharts
At what point does this growth change from rational expectations to irrational exuberance? If you're invested in these stocks, I'd recommend keeping a close eye on each company's bottom line, as well as their ability to generate free cash flow, to make sure that a sudden shift in sentiment doesn't send your favorite multibaggers plunging. There have been many examples of former high-flyers crashing to earth over the past 12 months, and the last thing we want is for these 3-D printing superstars to join that woeful lineup.
What's next?
So far, there hasn't been any real cause for concern in 3D Systems' or Stratasys' earnings, so sentiment remains strongly in 3-D printing's corner. That's certainly the case for The Motley Fool's CAPS community, which has given 3D Systems a five-star rating. 96% of our CAPS players expect the company to pick them up lots more of that nice, green moon money. Do you agree with them? You may want to add 3D Systems to your Watchlist, for all the news we Fools can find, delivered to your inbox as it's published.
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