Why Proto Labs' Shares Jumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of rapid production company Proto Labs (NYSE: PRLB  ) jumped 26% today after releasing earnings.

So what: Fourth-quarter revenue rose 31.1% to $33.6 million, beating the consensus estimate of $32.7 million. Earnings per share of $0.31 were way ahead of the $0.26 analysts expected, driven by gross margin rising from 56.8% to 62.5%. 

Now what: When you beat estimates by that margin, your stock often jumps, and when you're leading a rapid manufacturing revolution, it only bolsters the market's opinion about you. That's what drove Proto Labs today.

The question is whether it's still a buy today. Consider that Proto Labs is worth $1.3 billion and generated only $33.6 million in quarterly revenue. I love the margins and I love the business, but that's a steep price, especially in a fast-changing sector. I'd be a seller today.

Interested in more info on Proto Labs? Add it to your watchlist by clicking here.


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  • Report this Comment On February 13, 2013, at 7:19 PM, smrny49 wrote:

    Not sure I am following your logic here. You are saying that a stock should be valued by analyzing market cap and revenue? These are absolutes. A more relative measure, of course, is to use eps ( preferably forward eps) and the growth.

    If they earned .31 cents this quarter lets conservatively assume they make 1.20 in 2013. This is a 40 multiple for a company which is growing at a 30% clip. There are other stocks in this sector which are much more expensive than this.

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