At the time of this writing, 3D Systems (NYSE:DDD) is worth about $1.5 billion more than Stratasys (NASDAQ:SSYS), despite the fact that analysts expect the two companies will bring in nearly the same revenues in 2014. In terms of valuation, 3D Systems trades with a forward P/E of more than 90, whereas Stratasys trades with a forward P/E of about 57, indicating that Stratasys will be significantly more profitable than 3D Systems. Although it may seem baffling why investors are assigning such a large premium to 3D Systems, it has everything to do with long-term opportunity.
On a high level, 3D Systems and Stratasys have very different approaches to their market opportunity. 3D Systems is taking more of an Amazon.com approach where it continuously reinvests its earnings into improve its chances of long-term success. As a result, 3D Systems has amassed seven different 3-D printing technologies, allowing it to cast a very wide net on the overall rise of 3-D printing. With only two major 3-D printing technologies suited primarily for prototyping, there is simply less earnings potential for Stratasys over the long-term than 3D Systems.
In the following video, 3-D printing analyst Steve Heller tells investors why he thinks it makes sense for 3D Systems to trade at a premium to Stratasys.
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Steve Heller owns shares of 3D Systems. The Motley Fool recommends 3D Systems and Stratasys. The Motley Fool owns shares of 3D Systems and Stratasys. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.