Shares of 3D Systems (NYSE: DDD) hit a 52-week high yesterday. Let's take a look at how the company got there to find out whether clear skies remain on the horizon.
How it got here
Consistent Fool readers (at least, consistent readers of Fool articles on 3-D printing) should know that I've been long-term bullish on 3-D printing for some time. That hasn't changed, but what has been changing over the past year is the market's awareness of this innovative technology.
What's also changing is the number of competitors in the space. It's shrinking, because 3D Systems and top rival Stratasys (Nasdaq: SSYS) are gobbling up smaller players and pushing the industry toward its inevitable consolidation. With both companies growing their revenue through acquisitions as well as organically, it should make plenty of sense why investors are getting more excited:
DDD Total Return Price data by YCharts
3D Systems has actually had the better half-decade, gaining 215% to Stratasys' 94% over the last five years. As you can see from the chart above, it's also made larger gains on both the top and bottom lines, particularly since turning a profit at the start of 2010. Both companies have tacked near each other in P/E ratio since then, representing similarly bullish sentiments.
What you need to know
3-D printing is still very much a growth industry, as fellow Foolish 3-D printing enthusiast Brian Stoffel recently pointed out. Growth expectations lead to loftier valuations, which could be risky for investors if 3D Systems takes an unexpected turn for the worse.
|
Metric |
3D Systems Result |
Stratasys Result |
|---|---|---|
| Market Cap | $1.6 billion | $979 million |
| Current P/E | 46.1 | 49.3 |
| Forward P/E | 28.5 | 29.5 |
| Price to Book | 6.1 | 5.2 |
| Price to Sales | 6.2 | 6.0 |
| Price to Cash Flow | 37.3 | 38.6 |
| Net Margin | 13.4% | 12.1% |
Source: Morningstar.
Neither company was immune to the last recession and could be hurt by this one as well. On the other hand, exiting another recession could bring a much larger bounce than it did before as more customers catch on to the appeal of building your own custom-shaped stuff on site. Most investors seem comfortable ignoring the high P/E and focusing on long-term growth potential.
A more concerted push for home users could hinder 3D Systems' growth, but the company's shown no sign of neglecting its valuable industrial clients. If anything, a long-term focus on consumers could make 3D Systems the stock to beat in this small sector. I've called 3-D printing one of the most important technology trends of the next five years, and I stand by that claim. Second place in five years would still offer a much greater market opportunity than market leadership now -- but 3D Systems doesn't look like it's playing for second place.
What's next?
Where does 3D Systems go from here? That will depend on how many more industrial clients come around to the benefits of 3-D printing, the outcome of the company's consumer push, and in the nearer term on how much the global economy gets hurt by any one of several potential catastrophes. The Motley Fool's CAPS community loves 3D Systems, giving the stock a rare five-star rating. A whopping 96% of CAPS players weighing in think the company will outperform, and I'm one of them. It's been one of my best-performing picks, and I'm holding it for the long term.
Interested in tracking this stock as it continues on its path? Add 3D Systems to your Watchlist now for all the news we Fools can find, delivered to your inbox as it happens. For a ton of great information on the 3-D printing industry's potential, take a look at the Fool's latest and greatest free report on 3D Systems, Stratasys, and one other crafty competitor in the race to build the "New Industrial Revolution."
