Why Investors Think 3D Systems Corporation Is a Better Buy Than Stratasys, Ltd.

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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Comments from our Foolish Readers

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  • Report this Comment On March 02, 2014, at 11:19 AM, uyutnaya wrote:

    Timely truth, as it's often on MF. Sober comparison - clear conclusion.

  • Report this Comment On March 02, 2014, at 5:28 PM, Pietrocco wrote:

    " 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."

    WHAT DOES IT HAVE TO DO WITH PROFITABILITY??????????

    DDD simply has a higher multiple, nothing to do with profitability. Everything to do with price in relation to earningns. Please rephrase!!!!

  • Report this Comment On March 03, 2014, at 8:59 PM, BillFromNY wrote:

    I've read the opposite take in several places. Stratasys is focused in on industrial use, while 3D Systems has spread itself too thin, trying to cover all the bases, and especially trying to be a supplier for consumers and industry both. The people who held that view didn't think much of the consumer market. There won't be much demand until you can ask it for a martini as in Star Trek.

    What then of ExOne? Street Sweeper, an admitted short, tore ExOne technology apart in an August article. It was old and not usable for certain lucrative industrial applications. It was slow and not suited for mass production of parts. Not much more than a prototype producer.

    This negative view was partly backed up by the Fool video put of a week ago of MF Blake Bos with 3D analyst Steve Heller. Heller had a favorable outlook on ExOne. But in response to a question about weaknesses, Heller said that the technology was not - maybe sophisticated is the right word - for production of certain aviation parts. Heller and Bos also stated that the ExOne was slow and could not be used for producing large amounts of a part when time was a factor.

  • Report this Comment On March 10, 2014, at 12:53 PM, AmericanExports wrote:

    If there were an imminent demand, lets say for example Defense / Military to produce parts as needed, would you expect this information to be public? The potential impact of such a strategy would likely become classified as would contracts and expenditures (which is why the Pentagon can't account for Trillions). There are only so many companies in the 3D space and only 2 U.S. companies with this kind of potential. On top of that these 2 companies recently established an alliance. The days of mass produced knock-offs are gone for profitability, that has moved to China and everyone knows it. The highly customized, specialized and creative production is where profits lie in the future. And no one is better positioned to profit from this significant trend than these 2 companies. It's like deciding 12+ years ago... should I buy Google or should I buy Amazon... are you kidding? Buy either, buy both... why split hairs?

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