Stratays Ltd. Is Down 33%: Is It Time to Invest in This 3-D Printing Company?

Earnings are out and the stock is still down 33%, so is this the perfect opportunity to jump in?

May 13, 2014 at 2:41PM

Stratasys Ltd. (NASDAQ:SSYS) reported solid first-quarter earnings last week, but shares have yet to rally on the results and remain down 33% year to date. Stratasys shareholders and interested investors can find an excellent breakdown here in this deep dive into Q1 earnings.

Today, I'm going to focus on the valuation of Stratasys to determine if it looks like a good investment from a relative valuation standpoint after the recent sell-off.

Relative valuation... what is that?
Before delving into relative valuation, it's important for all investors to understand what causes a company's stock price to increase or decrease 

For most investors, they'd typically like to see a stock price go up, but what specifically causes a stock price to increase? For simplicity's sake, two criteria generally affect share price over the short and long term -- company performance and how the stock market feels about that performance.


Image courtesy of Stratasys

A company's performance is looked at through a variety of metrics, but sales and earnings are the most popular for a company like Stratasys. For example, Stratasys generated $538 million of sales over the last 12 months and has grown those sales by 37% a year over the last five years. For this awe-inspiring performance, the stock market has decided investors have to pay eight dollars for one dollar of sales at Stratasys; in other words, the company has a price-to-sales multiple of eight. When we multiply the price-to-sales multiple by yearly revenue, we get Stratasys' market capitalization of $4.4 billion, or $89.25 per share. 

As investors can see, the price is equal to how the company is doing (sales) multiplied by how the market feels about those results (price to sales). The concept that investors really want to focus on is the fact that it takes a company months or years to change operating results, but feelings can change overnight. So, in both the short and long terms, how the market feels can be a very large driver of a stock's price.

There are several ways to calculate a relative valuation, but for this case we'll look at a scenario in which multiples contract due to decreased expectations from the stock market. Then we'll look at what rate of revenue growth would be needed to offset the contraction of the multiples and still generate a satisfactory return for shareholders. 

Enough already! Is Stratasys a good buy or not?
Now that investors are familiar with how a company's stock price is determined from day to day, the relative valuation can commence. In the video below, Motley Fool analyst Blake Bos will dive head first into a scenario that could give investors an 8%-12% yearly return over the next five years, and then explain why he thinks it could be a likely scenario. He'll also tell investors why he's still not sure about investing in Stratasys today, and offer insight into how investors should look at the company. 

Are you ready to profit from this $14.4 trillion revolution?
Let's face it, every investor wants to get in on revolutionary ideas like 3D printing before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.

Blake Bos has no position in any stocks mentioned. The Motley Fool recommends Stratasys. The Motley Fool owns shares of 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

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