ExOne's Big News Pulls 3D Systems Shares Higher -- but Why?

A narrow profit posted by 3-D printing newcomer ExOne (NASDAQ: XONE  ) after Wednesday's close has buoyed the beleaguered sector today. Not only has ExOne risen by more than 6.5% today on news that it earned $902,000 in net income (compared to a consensus estimate of a $2.8 million loss), but 3D Systems (NYSE: DDD  ) has also jumped, gaining about 3.5%, while Stratasys (NASDAQ: SSYS  ) is enjoying small gains.

Is this genuinely good news for all three companies, or are investors casting too wide a net? Let's take a look at how ExOne's report compares to the most recent quarterly earnings of the two established players (click here for 3D Systems' latest report, and click here for Stratasys' latest report).

ExOne's first time at bat
This was ExOne's first earnings report following a February public offering. The company is not quite at the same level on a raw numerical basis as 3D Systems or Stratasys, as you can see in this quick comparison:

3-D Printing Side-by-Side | Create infographics.

What's most surprising here isn't that ExOne is so far below its peers on a revenue basis, but that it has managed to be profitable at a time when Stratasys hasn't, even after what was the largest merger that sector has seen to date. More importantly, ExOne is growing by leaps and bounds, which isn't too surprising, considering how small it is right now:

3-D Printings Crazy Growth | Infographics.

This monster growth happened thanks to sales of just eight machines! Considering that revenue from machine sales came to $8.9 million, it's obvious that ExOne has decided to approach the 3-D printing space from a completely different angle from 3D Systems, which has recently embraced a tiny consumer market with a line of low-cost machines for homes and hobbyists. ExOne has only sold 13 machines all year, compared to five last year. While 3D Systems didn't offer specific printer sales totals, I estimated that Stratasys moved nearly 3,400 printers in 2012 based on its earlier reports and stated growth rates for the year. ExOne has a different niche, to put it mildly.

Is this really good news for 3D Systems?
Before you convince yourself that ExOne's earnings beat heralds great things for 3D Systems and Stratasys, it's important to note that not only are ExOne's machines larger and far more expensive than the typical printer sold by the Big Two, but they're also designed to use multiple materials to assemble production-quality finished parts. ExOne CEO Kent Rockwell has noted that his printers use stainless steel, bronze, glass, and ceramics, among other materials.

The machine you see here is ExOne's largest printer, with a total print area that's large enough to put a person inside. Most of 3D Systems' machines can't come close to its size, and except for the very largest and most advanced of 3D Systems' industrial-scale printers, none offer material selection to match ExOne. The two companies simply target different subsets of commercial users. An assumption that ExOne's success is a harbinger the industry's golden age is no more meaningful than an assumption that a company making 100-ton earth movers is comparable to a consumer-focused automaker.

It will definitely be interesting to watch ExOne's progress throughout the year, but I'd caution against reading its success as proof positive that the entire industry will thrive. Despite its long history as a technology, 3-D printing is still in its early stages, and there are bound to be a number of developments between here and maturity that could upend the best-intentioned projections of 3-D printing, both as a tool and as an investment.

3D Systems is at the leading edge of a disruptive technological revolution, with the broadest portfolio of 3-D printers in the industry. However, despite years of earnings growth, 3D Systems' share price has risen even faster, and today the company sports a dizzying valuation. To help investors decide whether the future of additive manufacturing is bright enough to justify the lofty price tag on the company's shares, The Motley Fool has compiled a premium research report on whether 3D Systems is a buy right now. In our report, we take a close look at 3D Systems' opportunities, risks, and critical factors for growth. You'll also find reasons to buy or sell the stock today. To start reading, simply click here now for instant access.

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9/28/2016 2:41 PM
DDD $17.67 Up +0.53 +3.09%
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