3-D Printing Stocks: Why Arcam AB (ADR) Had a Great January, While the Others Were Losers

As we bid adieu to January, investors in Sweden-based metals 3-D printing company Arcam  (NASDAQOTH: AMAVF  ) are likely eagerly anticipating the release of the company's fourth-quarter and full-year 2013 results, hoping January's 22.2% stock price rise is just the start of another fantastic year. Meanwhile, investors in industry juggernaut 3D Systems (NYSE: DDD  ) , No. 2 player Stratasys (NASDAQ: SSYS  ) , industrial-focused ExOne (NASDAQ: XONE  ) , and newcomer to the public markets voxeljet (NYSE: VJET  ) are likely happy that the volatile month is now in the rearview mirror. The stocks of these companies lost 16.4%, 11.5%, 22.2%, and 9.4%, respectively.

Why was Arcam such a winner, while the others were moderate to big losers? It's likely due to a combination of the valuation situation as we started the month plus the news that came out during the month. Let's take a look.

3-D printing stocks' valuations at start and end of month
Here's what the valuation and market cap picture looked like as we started the month.

Data as of Jan. 3

Company

Market Cap

Annual Revenue (Millions)

Price/Sales

P/E

P/E (FRW)

Operating Margin (TTM)

Profit Margin (TTM)

3D Systems

$9.9B

$460.2

21.0

209

75.3

18.7%

9.6%

Stratasys

$6.7B

$400.5

16.3

N/A

58.3

(1.1)%

(7.3)%

ExOne

$962.6M

$41.5

21.7

N/A

155.6

(0.7)%

(5.7)%

Arcam

$585.9M

$29.5

20.2

173

N/A

11.5%

11%

Voxeljet

$729.8M

$13.0

55.9

N/A

N/A

0.6%*

(2.0)%*

Sources: Yahoo! Finance; voxeljet's third-quarter earnings report.
*For nine-month period through Sept. 30.

Perhaps not surprisingly, Arcam, which focuses exclusively on the medical implant and aerospace industries, looked like the best bet as we started 2014. Arcam and 3D Systems were the only 3-D printing players that were (and still are) profitable from a GAAP standpoint, and Arcam had a lower price-to-earnings ratio and a slightly lower price-to-sales ratio. Additionally, it had (and still has) the best profit margin of the group.

Here's how the 3-D printing companies stack up on valuations and market caps as we close out January. (The annual revenue and margin data remain the same, as none of the companies has yet released fourth-quarter earnings.)

Company

Market Cap

Price/Sales

P/E

P/E (FRW)

3D Systems

$8.0B

17.8

168

61.2

Stratasys

$5.9B

14.8

N/A

53.8

ExOne

$677.1M

16.8

N/A

168.1

Arcam

$746.7M

24.1

221

N/A

Voxeljet

$558.0M

42.9

N/A

N/A

Data as of Jan. 31. Sources: same as noted in previous table.

Granted, Arcam's now sporting the second-highest P/S ratio among these 3-D printing companies and the highest P/E ratio among the two profitable companies. That said, Arcam is so much smaller than the two major players that -- from a strictly valuation standpoint -- it still looks like a better bet than 3D Systems (and Stratasys, for that matter). The law of large numbers dictates it's easier for smaller companies to post the same percentage increases in revenue and earnings than it is for larger companies.

As to the other two smaller players, ExOne looks a bit pricey from a forward P/E basis, at least in comparison to Arcam's P/E. voxeljet is simply too new a public company -- it went public last October -- to predict with any degree of certainty how its business will progress. Additionally, its valuation is still sky-high compared with the other companies, even the smaller companies, which are best considered its peers. 

Some key events in January
Now, let's look at events than occurred during the month that positively and negatively affected the stock prices of the 3-D printers. Remember, just because events (notably, the ratings moves here) affected stock prices doesn't mean they're relevant to a company's long-term business prospects. There's a lot of noise out there.  

Jan. 7-10 -- New product introductions at Consumer Electronics Show

3D Systems and Stratasys announced many new products and partnerships at this event. Two of the standout new product introductions were 3D Systems' Cube 3, a sub-$1,000 3-D printer, and Stratasys' MakerBot unit's Replicator Mini.

Jan. 14 -- Stratasys announced that it anticipated 2014 earnings will fall short of analysts' estimates.

Stratasys said it expected its 2014 adjusted earnings per share to be in the $2.15 to 2.25 range, below the consensus of $2.31. The company cited a planned significant increase in its operating expenses as the reason, as it intends to ramp up its marketing and R&D activities. Sacrificing short-term profits for activities to maximize long-term growth is a must if Stratasys wants to stay competitive with 3D Systems, so investors shouldn't view this news as negative.

Jan 14 -- ExOne said its 2013 revenue would be less than expected.

ExOne lowered its revenue expectation to a range of $40 million to $42 million, below its prior guidance of $48 million. It cited delayed approvals for foreign sales of four systems. These orders will reportedly be booked in the first half of 2014. This is simply a case of revenue shifting from one quarter to a later quarter or two. ExOne is a smaller company that sells pricey machines (costing $500,000-plus), so quarterly revenue should be expected to be "lumpy" for some time.

Jan. 16 -- 3D Systems announced its teaming with Hershey.

These two companies are teaming to produce 3-D printed edibles and 3-D printers for "prosumers" (professional consumers) that can produce edibles. 

Jan 21 -- Credit Suisse ratings moves.

Credit Suisse dowgraded 3D Systems  to "neutral" from an "outperform" rating, and upgraded Stratasys to "outperform" from "neutral." The firm cited valuation for both moves. 

Jan. 21 -- Arcam's 4:1 stock split became effective.

Jan. 26 -- Stratasys introduced a revolutionary new printer.

Stratasys introduced the Objet500 Connex3, the world's first color multi-material 3-D printer. 

Month of January -- Arcam announced two new orders for its EBM 3-D printers.

Arcam received an order for one electron beam melting system from a leading Chinese medical implant company and one from an U.S.-based aerospace company during January. Though January wasn't a strong month for orders, it followed a strong December, in which the company received four orders and also acquired a powder metals supplier. 

(I've excluded a well-known short-seller's attack on 3D Systems from this list.) 

Bottom line
Arcam was a big winner in January, while the other 3-D printing companies were losers, probably because it had a more compelling valuation as we started 2014, and also because it was the only 3-D printing company that had some positive, but no negative, news associated with it during the month.

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Read/Post Comments (2) | Recommend This Article (5)

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  • Report this Comment On February 06, 2014, at 12:15 AM, hksche2000 wrote:

    Aren't we splitting hairs? All of the 3D companies seem to be hitting a rough patch here, and WS is beating them down to take advantage of a great buying opportunity.

    DDD still seems to have the most eggs in its basket, is profitable with good margins, and is the most diversified. If Arcam encounters any problems with wear and tear of its metal endoprostheses even in a small number of patients, it's lights out for the company. Scary!

    Got out at $50.

  • Report this Comment On February 06, 2014, at 9:21 AM, Thebeerghost wrote:

    It has a number of aerospace clients so it's not lights out. The imaginary problem of extra wear and tear is off as the 3d process allows for better customized fits to patients which cuts down on wear and tear. Nice job getting out at the post-split peak(for now) though.

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