3D Systems (DDD 2.36%) and Stratasys (SSYS 1.43%) have now both reported fourth-quarter and full-year 2018 earnings (3D Systems here and Stratasys here), so let's compare their 2018 results.
Keep in mind that qualitative factors can be just as meaningful as quantitative ones, and future results are more important than past ones. Even with these caveats, the findings from this metric face-off should be helpful for making investing decisions in the 3D printing space.
Image source: Getty Images.
Revenue
|
Company |
2018 Result |
|---|---|
|
3D Systems |
6.4% year-over-year increase to $687.4 million |
|
Stratasys |
1% decline to $663.2 million |
Data sources: 2018 earnings reports.
Advantage: 3D Systems
3D Systems is the winner here, as its revenue grew at a fair pace, while Stratasys' contracted slightly in 2018. That said, 3D Systems' results did get a boost in the first quarter from its acquisition of the Vertex Global dental material brands in the first quarter of 2017. However, it's a very small lift and doesn't affect the results of this face-off.
Both companies have struggled to grow revenue since 2015, which we can probably attribute to a glut of 3D printers in the field due to heady sales during the few go-go years preceding 2015 along with increased competition beginning in 2016. That's when 2D-printing king HP Inc. and venture-backed Carbon launched fast polymer 3D printers for the enterprise market.
Check out the latest earnings call transcripts for 3D Systems and Stratasys.
GAAP earnings per share (EPS)
|
Company |
2018 Result |
|---|---|
|
3D Systems |
($0.41), up from 2017's ($0.59) |
|
Stratasys |
($0.22), up from ($0.75) |
Data sources: 2018 earnings reports. GAAP = generally accepted accounting principles.
Advantage: Stratasys
Neither company is performing well on this key metric, as both are unprofitable. Stratasys, however, gets the win here because its GAAP loss narrowed the most from 2017 -- 71% to 3D Systems' 31%. Moreover, there's an argument to be made that Stratasys outperformed 3D Systems even more than these percentages suggest because 3D Systems probably had an easier 2017 comparable. In 2017, triple D's earnings were hit hard in the third quarter, driven by a $12.9 million writedown for legacy products and parts inventory.
Adjusted EPS
|
Company |
2018 Result |
|---|---|
|
3D Systems |
$0.15, up from 2017's ($0.02) |
|
Stratasys |
$0.52, up 16% from $0.45 |
Data sources: 2018 earnings reports.
Advantage: Stratasys
There's an argument to be made in favor of each company here. 3D Systems' results improved the most from 2017, but Stratasys is more profitable. Overall profitability is more important, in my opinion, so Stratasys gets this one in its column.
Image source: Stratasys.
GAAP gross margin
|
Company |
2018 Result |
|---|---|
|
3D Systems |
47.2%, flat with 2017's 47.2% |
|
Stratasys |
49%, up from 48.3% |
Data sources: 2018 earnings reports.
Advantage: Stratasys
A higher gross margin relative to a competitor with a similar business profile is often indicative of better operating efficiency and/or stronger pricing power.
Liquidity -- net cash on hand and operating cash flow
|
Company |
2018 Result |
|---|---|
|
3D Systems |
$110 million of cash and cash equivalents and no long-term debt at year-end. Generated $4.8 million in cash from operations during the year. |
|
Stratasys |
$393.2 million in cash and cash equivalents and no long-term debt at year-end. Generated a record $63.7 million in cash from operations during the year. |
Data sources: 2018 earnings reports.
Advantage: Stratasys
While both companies are in good shape from a liquidity standpoint, Stratasys is the victor here by a country mile. It operations generated more than 13 times the cash as 3D Systems' operations did. And this is as close to an apples-to-apples comparison as it gets as these companies took in nearly the same amount of revenue in 2018. Moreover, Stratasys' cash hoard is 3.6 times that of its rival's.
As the following chart shows, over the last two years, Stratasys has been considerably outperforming 3D Systems with respect to the two liquidity metrics discussed here.
Data by YCharts.
Research and development spending
|
Company |
2018 Result |
|---|---|
|
3D Systems |
$95.3 million, or 13.9% of revenue |
|
Stratasys |
$99.0 million, or 14.9% of revenue |
Data sources: 2018 earnings reports.
Advantage: Tie
The companies' spending on R&D as a percentage of revenue is in the same general ballpark. Investing in R&D is critical for companies involved in rapidly evolving technology markets.
2019 guidance
|
Company |
2019 Guidance |
Projected Year-Over-Year Changes |
|---|---|---|
|
3D Systems |
Did not provide any numbers. However, CFO John McMullen said on the earnings call that the company expects "continued revenue growth, improved profitability, and cash generation." |
N/A |
|
Stratasys |
Revenue of $670 million-$700 million; adjusted EPS of $0.55-$0.70; and a GAAP loss per share of $0.40 to $0.22. |
Revenue: 1% to 5.5%; adjusted EPS: 6% to 35%; GAAP EPS: loss widening by 82% to flat with 2018. |
Data sources: Q4 2018 earnings reports and conference calls.
Advantage: N/A
We don't know which company is most optimistic about its 2019 financial performance because 3D Systems didn't provide guidance. This is the second full year it didn't provide an outlook. Management has previously cited the unpredictability surrounding legacy product quality and reliability issues.
The winner is... Stratasys
Final score: Stratasys: 4; 3D Systems: 1; tie or N/A: 2.
Keep in mind the caveats listed in the opening: Qualitative factors can be at least as important as quantitative ones and future results matter more than current ones. Moreover, I didn't cover stock valuations.
On that general topic, shares of Stratasys have gained 32.7% so far in 2019 through Monday, while shares of 3D Systems are up 11.3%. The S&P 500 has returned 13.5% over this period.
