Stratasys (NASDAQ:SSYS) never seemed to live up to the high growth potential the market thought it had as recently as 2014. Growth has slowed, write-downs have flared up, and the stock has dropped like a rock as well. 

Sometimes when a stock drops as quickly as Stratasys has it's a buying opportunity. But in this case, it may be a sign that rough roads are ahead. 

Orange egg 3D printed and sitting on the floor.

Image source: Getty Images.

The market never understood the 3D business

If you listened to the story of Stratasys and 3D Systems (NYSE:DDD) a few years ago, 3D printing was supposed to revolutionize product development and manufacturing. It was only a matter of time before printers were everywhere and someone could 3D print a car or airplane out of their own home. 

What this didn't take into account was that 3D printing has been around for decades, so it wasn't new to the engineering community that used these kinds of products regularly. And consumers didn't know how to run the software required to make 3D parts. What good is a 3D printer if you don't first know how to run a 3D CAD program? 

The growth investors expected from 3D printing companies simply never materialized and that's a big reason Stratasys has been a disappointment for investors, which you can see below. 

SSYS Chart

SSYS data by YCharts

Collaboration deals will take time

One legitimate path for growth is for Stratasys to embed itself into the manufacturing process within industrial companies. And the company has done that with partnerships with Ford and Airbus, just to name a couple examples. 

The challenge is that collaboration agreements like this take years to be meaningful revenue generators for a company like Stratasys. And given the decline in revenue over the past two years it's clear these deals aren't driving financial results yet. 

The real money is in providing services

What's become clear in 3D printing is that the real money isn't in the printers or materials that Stratasys is selling. Rather, money is in the services around the printers. Proto Labs (NYSE:PRLB), which has a platform designers use to get parts printed in a matter of hours or days, has remained profitable as Stratasys and 3D Systems have lost money. 

SSYS Net Income (TTM) Chart

SSYS Net Income (TTM) data by YCharts

Stratasys has tried to move into offering similar services as Proto Labs, but it will take time to build out this business. Stratasys is also locked into using its own technology, whereas a company like Proto Labs can use any type of prototyping technology that makes sense for its customers. Strategically, Stratasys is in a weak position even in on-demand 3D printing. 

I think 3D printing will become increasingly important to product developers, but unless there's a profitable foundation to build on I'll stay out of Stratasys stock. 

Travis Hoium owns shares of Ford. The Motley Fool owns shares of and recommends Ford and Proto Labs. The Motley Fool recommends 3D Systems and Stratasys. The Motley Fool has a disclosure policy.