Meet the Start-Up That's Disrupting 3D Systems Corporation's High-End Portfolio

Source: Formlabs.

Meet the $3,299 Form 1 by Form Labs, an up-and-coming, 3-D printing start-up spun off from MIT Media Labs. This 3-D printer came to be thanks to patents on a 3-D printing technology known as stereolithography, or SLA, held by 3D Systems  (NYSE: DDD  ) , expired. On a high level, SLA utilizes an ultra-violet-curable liquid and an ultra-violet laser to create high-detail prototypes and models in a layer-by-layer process. SLA is typically reserved for high-end printers and applications demanding high precision. A top-of-the-line 3D Systems SLA unit can easily cost over $100,000.

As you can imagine, offering a $100,000 technology in desktop form is a compelling value proposition in the marketplace. Consequently, an engineer may opt for Form 1 over extrusion-based alternatives because it could give him a much higher-quality result for a relatively small incremental cost. After speaking with a Formlabs representative at the Inside 3-D Printing Conference in New York City, it came to light that demand has been so strong that purchases made today won't be fulfilled for another six months!

Cleary, 3D Systems may have a serious problem on its hands, because if a start-up can democratize a 3-D printing technology typically reserved for high-end and high-cost machines for a fraction of the price, it may force significant pressure on pricing down the road.

In the following video, 3-D Printing analyst Steve Heller and Motley Fool industrial bureau chief Blake Bos sit down to discuss the risk that Formlabs poses to 3D Systems. The key takeaway is that while Form 1 is a promising product, investors should wait until Form 1 establishes itself before assessing the risk it poses to 3D Systems' business.

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  • Report this Comment On April 11, 2014, at 1:55 AM, brandonchen wrote:

    Do you still recommend "long-term" investors to buy 100x + PE stock DDD now ? Even after the 50% slide from when you recommended to buy it at $80-90?

  • Report this Comment On April 11, 2014, at 3:19 AM, TMFTopDown wrote:

    Brandon,

    I don't agree that valuing 3D Systems by its P/E ratio is appropraite for a high-growth stock that's sacrificing short-term earnings in exchange for improving its long-term profitability prospects.

    Also, I never claimed to be a market timer and I'm the first to admit that my timing is terrible. :) But if you set a long enough time horizon, 5-10 years in this case, and buy in thirds (dollar cost average), I think there's still an investing case to be made for 3D Systems. Keeping your total allocation to a small percentage of portfolio is also something I can get behind.

    Thanks,

    Steve Heller

  • Report this Comment On April 11, 2014, at 3:51 AM, brandonchen wrote:

    So what financial valuation matrix do you use for so-called high growth stocks, if you think that PE, net profit or even ROE are not appropriate to gauge a company's ability to return earnings to shareholders ?

    Why should investors buy a stock with declining EPS this year, especially when it is valuing at over 100x PE?

    High price-to-dream stocks could easily crush like we have seen recently if too much expectations are built into stocks...

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