Stratasys, Ltd. vs. 3D Systems Corporation: More Market Share Isn't Always Better

More market share doesn't necessarily mean more revenues.

Mar 13, 2014 at 11:01AM

Stratasys (NASDAQ:SSYS) told investors during its fourth-quarter earnings call that, including acquisitions, it has sold more than 75,000 3-D printers since its inception, representing the largest installed base, or market share, of 3-D printers in the world. While this is certainly an encouraging metric that points to a steady stream of recurring revenues from consumable material sales in the future, it doesn't necessarily translate to Stratasys commanding the largest revenue share in the industry. 3D Systems (NYSE:DDD) already controls more of the 3-D printing industry's revenue than Stratasys and that isn't expected to change anytime soon.

Breaking it down
In 2012, the worldwide 3-D printing industry generated $2.2 billion in revenues, of which Stratasys contributed $215.2 million and 3D Systems contributed $353.6 million. Using a combination of industry, company, and analyst metrics, we can get an idea of how much revenue share each company is expected to control in 2015.

3-D Printing Revenue Share. Source: 3D Systems, Wohlers Associates, Yahoo! Finance.

In 2015, the 3-D printing industry is expected to generate $4 billion in revenue, of which 3D Systems expects to generate more than $1 billion in sales, and analysts expect Stratasys to generate about $842 million in full-year sales. Although Stratasys is expected to close the revenue gap between itself and 3D Systems by 2% by the end of 2015, it continues to suggest that the largest installed base of printers doesn't always translate to a greatest share of revenues. This likely has to do with the fact that more than 44,000 of Stratasys' 75,000 3-D printers in circulation are low-cost MakerBot 3-D printers, which don't generate nearly as much recurring revenue as higher end professional and industrial printers.

Down the road, it's entirely possible that 3D Systems will control more of the industry's profits than Stratasys even if 3D Systems technically has a smaller market share. Considering that 3D Systems closed out 2013 with a stronger 52.1% gross profit margin versus Stratasys' 46.7%, it seems downright realistic.

Sound familiar?
This sounds a lot like how Google dominates Apple in terms of mobile market share with its open source Android operating system, but Apple ends up controlling the majority of the mobile industry's profits, signifying that Apple's offerings are significantly more valuable on a per unit basis. Applying the same logic to 3D Systems and Stratasys, 3D Systems has a more valuable portfolio on a per printer basis despite technically having lower market saturation. It'd be hard to argue against this logic because 3D Systems has seven different types of sophisticated 3-D printing technologies, covering a wider range of professional and industrial applications than Stratasys could ever dream of.

A more relevant measure
Instead of focusing on market share in the years ahead, 3-D printing investors should focus on revenue share to gauge a company's long-term-profitability prospects. The company that can gain the greatest revenue share is likely going to have the easiest time converting that revenue into more profit over the long term. With 3D Systems expected to outpace Stratasys in terms of revenue share in the years ahead, 3D Systems seems like the better horse to bet on.

1 must-own stock in 2014
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Steve Heller owns shares of 3D Systems, Apple, and Google. The Motley Fool recommends and owns shares of 3D Systems, Apple, Google, 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers