Why ExOne Co Shares Collapsed Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of ExOne Co (NASDAQ: XONE  ) are trading 15% lower today after the 3-D printing upstart reported rather miserable results for its first quarter.

So what: ExOne's revenue, which was already tiny, declined 8% year over year to $7.29 million, which was well below the somewhat modest $9.24 million top line Wall Street analysts had expected. ExOne's bottom line also blew up in rather spectacular fashion, with a $0.38 loss per share not even in the same ballpark as analysts' expectations of a $0.12 loss per share. Even without one-time items, ExOne's adjusted loss per share was $0.37. The company's gross margins were shredded by "significant development costs" -- that margin was 22.2% in the first quarter, down from 35.8% a year ago.

As a result of this big miss, ExOne reduced its margin guidance for the full year from an earlier range of 43%-46% to a new range of 40%-43%. Its revenue projection is now in the range of $55 million to $60 million for the full year, which does come in a hair ahead of Wall Street's $57 million consensus estimate. Since capital expenditures are now estimated to range from $31 million to $34 million for the year, ExOne will report a loss -- its gross profit will max out at $25.8 million, according to this guidance. The only question is, how bad will the loss actually be?

Now what: ExOne still has enough cash on hand to work through a period of losses, as it still boasts cash and equivalents of $77.6 million, down from $98.5 million a year ago. But this report is unmistakably lousy, and there's really no way to put a positive spin on it. ExOne was a super-hot stock out of the IPO gate a year ago, as shares nearly tripled in a few months before the growth-stock bloodbath began. Since then, it appears that investors have realized that paying 10 times sales (or more) for a tiny company running behind market leaders that are also experiencing weakening fundamentals might not be the best investment strategy.

ExOne will still be valued at over six times forward sales if it reaches the high point of its revenue projection, and that's the optimistic case here. I'd stay on the sidelines until ExOne -- and 3-D printing companies in general -- prove that they can shore up their margins in the face of the inevitable onslaught of lower-cost competition.

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  • Report this Comment On May 15, 2014, at 3:52 PM, Kattie15 wrote:

    Investors' overreacted to ExOne's poor earnings. 3D Printing industry is in its initial stage and it will grow over time as adoption rates increase. The opportunity is so huge that ExOne will benefit from it. http://bit.ly/1gsvafc

  • Report this Comment On May 15, 2014, at 5:48 PM, madseamus wrote:

    another loser by fool.

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