"While the growth in our high-end system business may seem to defy conventional expectation given the current economic environment, this performance reflects our successful new product and marketing strategies which target new applications for direct digital manufacturing (DDM)."
That assessment, cribbed from CEO Scott Crump's Q3 rundown at Stratasys
I was wrong.
As yesterday's earnings report revealed, this Motley Fool Rule Breakers pick is getting along just fine by taking the high road on DDM -- more than fine, actually. Because as it turns out: "our high-end systems ... traditionally operate at significantly higher rates of consumable usage. For example, the FDM 900mc, our largest and fastest high-end system, will annually consume over 10 times the material consumed by the average 3D printer in a year." (Gee, now you tell us!)
This explains why, in spite of a 5% decline last quarter in the number of 3D "printers" shipped to customers like Hewlett-Packard
So, um, it would appear that management knows what it's doing after all. (My bad.) Now that it's demonstrated this, I'd say Stratasys's prediction that it will end fiscal 2008 with $125 million to $130 million in revenue and $0.75 to $0.80 EPS deserves the benefit of the doubt. (Especially seeing as we're only a few weeks away from said year-end.)
These numbers work out to about 14% sales growth and 17% growth in profits over fiscal 2007. To me, that seems a bit slow for a putative "rule breaker," and I have to admit, I wouldn't mind seeing the company generate a bit of free cash flow to back up those GAAP earnings. (For the time being, management only claims to be "generating positive cash flow from operations" (emphasis added).)
That said, the 17 P/E that Stratasys will carry if it hits its numbers looks just about right for a 17% grower. Tune in tomorrow, and we'll see if rival 3D Systems