3D Systems: Here Is Your Buying Opportunity

Fresh off of a share split, 3D Systems (DDD -1.97%) continued to be taken lower as its fourth-quarter revenue came in slightly below analyst expectations. Looking beyond this short-term setback, the big story here is that 3D Systems' long-term investment thesis appears to remain intact. As a result, this punishing has inadvertently presented long-term investors with a great buying opportunity.

The pulse of business:

Source: 3D Systems quarterly earnings press release. Revenue in thousands of dollars

For the quarter, the company reported a net income of $22.6 million on record revenues of $101.6 million, which represented a 45.4% year-over-year increase. The company's gross profit margin expanded 460 basis points year over year to 51.7%, indicating that sales growth has not come at the expense of profitability. For the full year, revenue grew 53.5%, fueled by a 90% year-over-year increase in product growth. Excluding acquisitions, 3D Systems reported 22.4% organic growth for 2012. All in all, these results look great on paper.

Falling short
Typical of many high-growth companies, expectations have likely gotten in the way of 3D Systems' long-term growth story. The company has projected 2013 revenues will range from $440 million to $485 million, representing a 24% to 37% increase from its 2012 results – a number far below last year's annual growth rate of 53.5%. The fact that the company trades with a P/E in the 70s, and its 2013 growth expectations are more or less in line with Wall Street expectations, justifies why we get a sell-off like today. Apparently, Wall Street would prefer if 3D Systems projected booming growth rates far beyond what the 3-D printing industry can actually support.

It comes with the territory
High-growth investors should be made aware that setbacks as a result of mismatched expectations are bound to happen from time to time. Over the long term, resetting these expectations are actually good for a company in 3D Systems' position because it increases the chances that it will be able to more easily please investors in the future. Obviously, this opportunity hinges on a company's ability to show continued signs of great progress.

Let's not forget
Investors absolutely love getting ahead of themselves when a technology as exciting as 3-D printing comes along and offers the promise of disrupting practically the entire manufacturing industry. The good news is that even though investors may become more timid on the prospects of 3-D printing, the incredible growth potential that 3-D printing offers to the world isn't going to change overnight. According to Wohlers Associates, the leader of 3-D printing related insights, it's expected that the 3-D printing industry will continue growing in the strong double digits in the coming years, and will eventually become a $6.5 billion industry in 2019. If you combine 3D Systems' 22.4% organic growth rate for 2012 with its revenue growth forecast for 2013, there's a good chance the company will grow faster than the industry average. Currently, investors do not seem to be focusing on the prospect of market share gains will be part of 3D Systems' future.

It's a marathon
High-growth investing often comes with a higher degree of volatility. Here at The Motley Fool, we believe taking a long-term view helps mitigate the short-term setbacks associated with high-growth investing. The fact of the matter is that 3D Systems increased its net income by 63.6% year over year and is now worth less than it was on Friday. Not to mention, the company is by far the most diversified 3-D printing investment around, which improves its chances of success over the long term. I've already put those valuation concerns aside, but the only thing I can say with certainty is that I won't be giving up on 3D Systems or the prospect of 3-D printing anytime soon.