3D Systems Goes Shopping (Again)

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3D Systems (NYSE: DDD  ) is at it again. The 3-D printer maker has purchased Geomagic, a privately held provider of 3-D modeling software. Geomagic's solutions give users the ability to design, sculpt, scan, and monitor objects throughout the entire design and manufacturing process. While a price was not disclosed, the deal is expected to be accretive to earnings next year.

3D Systems has taken a different approach to growth than rival Stratasys (NASDAQ: SSYS  ) . Its history of serial acquisitions have become the way it fills gaps within its portfolio, ultimately giving it broader exposure to the entire 3-D printing industry. Stratasys, on the other hand, has decided to focus on the higher end of the market. The Cube, a $1,299 consumer-oriented 3D printer is just one example how 3D Systems is leaving no opportunity unturned.

Analyzing the deal
The less gaps in 3D Systems' portfolio, the less customers have to venture outside of 3D Systems' umbrella. Consider this another reason why customers won't have to utilize Autodesk's (NASDAQ: ADSK  ) 3-D modeling software. Although some have questioned 3D Systems' approach to growth, I like to think of it as another Oracle (NYSE: ORCL  ) model. Historically, Oracle has been a serial acquirer, bolting on new offerings to bolster its core portfolio. The more products Oracle offers, the more opportunities its sales force can upsell the customer. Over the long term, this strategy has helped fuel massive, market-beating returns for shareholders. Given 3D Systems' acquisition history (16 since 2011), I think the company is following a similar trajectory.

It's a land grab
The current state of the 3-D printing industry is like the Wild West. It's early and very few players have been established. The companies that invest today will become the same companies that have a tremendous strategic advantage in the next decade when the technology really asserts itself. There's no question that 3D Systems' trailing P/E of 84 is lofty, but that's how a growth company that's reinvesting into its business should be priced. The "seeds" that are planted today are how shareholders could be handsomely rewarded in the future. Even at current levels, 3D Systems' P/E is expected to drop to 36 as its earnings are expected grow by 27% over the same period. That still represents a premium to growth, but over the next five years analysts are only expecting 3D Systems to grow its earnings by 14%. To me, this figure seems completely off the mark when you consider the profound implications 3-D printing has on the entire manufacturing industry.

What's inside Supernova?
3D Systems has been a favorite selection of Motley Fool co-founder David Gardner, helping lead his stock picks to gains of more than 120% in our Stock Advisor service since it launched in March 2002. Compare that to the S&P 500's return of 29% over that same time frame. David has managed to trounce the market by always being on the lookout for revolutionary stocks and recommending them before Wall Street catches on to their disruptive potential. If you're interested in how David discovers his winners, click here to get instant access to a personal tour behind David's Supernova service.

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DocumentId: 2179865, ~/Articles/ArticleHandler.aspx, 9/30/2016 2:40:59 PM

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9/30/2016 2:24 PM
DDD $18.00 Up +0.34 +1.93%
3D Systems CAPS Rating: ****
ADSK $72.41 Up +0.82 +1.14%
Autodesk CAPS Rating: ***
ORCL $39.34 Up +0.22 +0.56%
Oracle CAPS Rating: ****
SSYS $24.21 Up +0.26 +1.09%
Stratasys CAPS Rating: ****