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.

Read/Post Comments (1) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • 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.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2254163, ~/Articles/ArticleHandler.aspx, 5/30/2015 12:50:07 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...