The carnage in high-flying growth stocks is well-documented. Cathie Wood's ARK Innovation ETF is down 33% since the beginning of 2020, compared to a 25% gain for the S&P 500. It's fallen nearly 80% from its peak. But some of the stocks caught up in the ARK frenzy may finally have returned to attractive prices for daring investors.

Proto Labs (PRLB 0.03%), for one, has come full circle. It is down more than 90% from early 2021, when Ms. Wood's purchases fueled a wild run-up. Although she completely exited her position more than a year ago, the sell-off has continued unabated. Expectations now seem so low that it might be worth the risk.

Manufacturing is coming back

Proto Labs is a small fry trying to bring innovation to the enormous manufacturing industry. It offers services like injection molding, machining, and 3D printing through an e-commerce platform. That allows engineers and developers to test new ideas rapidly and shorten the time it takes to bring designs to life. It has also developed a network of manufacturing partners to help customers quickly go from prototype to production.

Like it sounds, Proto Labs is highly dependent on a healthy domestic manufacturing industry. More than 80% of its revenue comes from the U.S. The pandemic rocked manufacturing. But data from the U.S. Bureau of Labor Statistics shows that jobs in the industry have rebounded. And although the latest report from the Institute of Supply Management showed a contraction in manufacturing activity, it was the first in more than two and a half years.

Chart showing manufacturing jobs have more than recovered to pre-pandemic levels.

Data source: U.S. Bureau of Labor Statistics. Chart by Author.

There are a variety of tailwinds for manufacturing beyond an economic rebound. Geopolitical tensions and supply chain issues faced during the pandemic are prompting companies to return some production to the U.S. Whatever the reason, over the summer, job growth in manufacturing grew at the fastest sustained rate since 1984 -- good news for Proto Labs.

User growth is slow and steady

Similar to manufacturing jobs, the company's user base has also recovered. The number of unique customers on its platform dropped in 2020. But robust growth in 2021 more than made up for the losses. Since 2018, it has posted 6.4% annualized growth. It may not make the cut for a growth-focused fund, but it does show the company is continually expanding its reach.

Graph showing slow 6.4% annualized growth of unique developers served.

Data source: Proto Labs. Chart by Author.

Like many parts of the economy, the rebound in 2021 led to a bit of a hangover. Year-over-year user growth for the first three quarters of 2022 has been 7%, 3%, and then a 3% decline, respectively. That has Wall Street fearing a potential recession on the horizon.

It's time to be greedy

Warren Buffett is often quoted as saying the time to be greedy is when others are fearful. In the case of Proto Labs, there has never been more fear. The stock trades near its all-time lows as a multiple of sales, cash flow, and earnings. It's understandable. Management projected revenue would drop by 10% next quarter and that earnings-per-share would be cut in half.

The probability of a recession in 2023 and the dismal guidance offered by management is not news. It's why the stock fell below its price at its initial public offering a decade ago. But with zero debt and a $725 million market cap -- in an industry management estimates at greater than $1 billion -- the potential reward over the next decade seems worth the risk. The hard part will be having the patience to wait if the outlook for 2023 darkens further.