Today wasn't a very good day to be a 3-D printing investor. Absent of any major news, shares of 3D Systems (DDD 1.07%) finished down more than 6%, while Stratasys (SSYS +0.63%) dropped nearly 9%, ExOne (XONE +0.00%) nearly 8%, and Voxeljet (VJET +0.00%) more than 15%. In other words, 3-D printing stocks got hammered for no apparent reason -- and that shouldn't bother long-term investors.
Putting it in perspective
Here at The Motley Fool, we take a long-term approach to investing, but we also like to monitor any big price movements to see whether there have been any material changes to the investment thesis. On days like today where there hasn't been a major news event driving the price action, it helps to take a step back and look at the bigger picture. In the past year, the performance of these 3-D printing companies has been simply astounding.
|
Company |
1 Year Price Change |
|---|---|
|
3D Systems |
198% |
|
Stratasys |
70% |
|
ExOne |
118% |
|
Voxeljet* |
75% |
Source: Google Finance.
*Since IPO on Oct. 23.
While no one likes to lose in the short term, investing in 3-D printing companies requires not only patience, but also the ability to live with a high degree of volatility. Ultimately, I think investors who demonstrate these skills will be handsomely rewarded.
Consider this
According to Wohlers Associates, a 3-D printing insights company, the 3-D printing industry was worth roughly $2.2 billion in 2012, but by 2021, it's expected to become a $10.8 billion industry. Assuming an even growth rate, the entire industry is expected to grow by 19.3% a year, compounded, through 2021. In other words, roughly every 3.75 years, the industry is expected to double in size. It's not surprising that investors have bid up these stocks considerably in anticipation of strong growth ahead. It's also not surprising that these same stocks experience violent pullbacks along the way.
Now, couple this with the fact that the Wilfried Vancraen, CEO of Materialize and voted most influential in 3-D printing by readers of TCT Magazine, was quoted saying how the 3-D printing industry will one day make up anywhere from 10% to 30% of the manufacturing industry. In 2010 terms, this breaks down to a $1 trillion to $3 trillion worldwide opportunity. Granted, there's no guarantee this will ever happen, but it shows you what an insider sees as the potential for 3-D printing and why you should be thinking about 3-D printing investing in terms of decades.
Sticking to the plan
As far as I can tell, this move was probably nothing more than a normal pullback for companies that have experienced tremendous growth over the past year. If you're a prospective 3-D printing investor, a slight pullback like today's may not be enough to get you excited, because these companies remain expensive on a price-to-sales and price-to-earnings basis. However, the longer term your time horizon, the less price matters.
