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Why Proto Labs Jumped 24.4% Last Month

By Keith Noonan – Jun 5, 2020 at 12:36PM

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The company's share price has climbed roughly 23% year to date despite headiwinds for the industrial sector.

What happened

Shares of Proto Labs (PRLB 0.11%) gained 24.4% in May, according to data from S&P Global Market Intelligence. The company's valuation dipped early in the month, but the stock rallied amid momentum for the broader market, excitement surrounding a potential breakthrough in the 3D-printing industry, and investment in a new production facility.

^SPX Chart

^SPX data by YCharts.

Proto Labs reported first-quarter results on April 30, posting non-GAAP (adjusted) earnings of $0.61 per share and sales of $115.1 million. The Q1 results topped the market's expectations, but the earnings release was paired with news that the novel coronavirus had resulted in a substantial business decline in April. Shares dipped early in May, but the stock recovered in conjunction with gains for the broader market and optimism surrounding a new resin technology that could boost momentum for 3D printing.

A 3D printer making a part.

Image source: Getty Images.

So what

Excitement for a new foam resin that has the capability to expand up to 40 times its initial volume after heat-induced ultra-violet treatment took hold in the 3D printing industry in May. Part production being limited by printer sizes has been a significant impediment to the growth of 3D printing, and the new foam-resin technology could allow printers to produce parts that are substantially larger.

The 3D Printing ETF, which combines 52 different stocks from the industry into a fund, climbed roughly 11% in the month, and Proto Labs appears to have benefited from the momentum. The stock likely also got a boost from news that the company had invested 10.5 million British pounds in a new 3D-printing facility that's expected to improve production capacity in the category by 50%. 

Now what

Proto Labs stock has dipped roughly 1% so far in June trading despite a rally for the broader market.

^SPX Chart

^SPX data by YCharts.

3D printing accounted for just 14% of Proto Labs sales in the first quarter, but it's the company's fastest-growing segment, and the business is positioned to benefit if demand for the technology accelerates. 

Proto Labs trades at roughly 67.5 times the average analyst target for this year's earnings and 7.8 times the average sales estimate.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Proto Labs. The Motley Fool has a disclosure policy.

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