If you've been following the hot additive manufacturing -- aka 3-D printing -- space, you probably know that newly public voxeljet's (VJET -40.89%) stock price nosedived last week, and took the other 3-D printing companies partially down with it. While the news for this upstart may not be as grim as it looks, voxeljet and its investors could still endure more turbulence.
When the market closed out the trading week, Voxeljet had been grounded 39%, while competitors 3D Systems (DDD 2.36%), Stratasys (SSYS 1.43%), and ExOne (XONE) declined by 8.6%, 6.4%, and 10.4%, respectively.
Data by YCharts
The sector's tough day on Tuesday was followed by the bottom falling out on Wednesday, precipitated by a bearish report by Citron Research, which Foolish writer Steve Heller nicely summarized. While my take varies a bit from Steve's, we're in agreement on the main point: Voxeljet appears to be a legitimate business with potential competitive advantages.
Voxljet's valuation still sky-high
It's just too soon to tell whether voxeljet's potential competitive advantages -- related to the size, speed, and configuration of its 3-D printers -- will come to fruition and justify its still extremely lofty valuation. No matter how you slice it, this stock is overvalued by just about any valuation measure, ven after its recent plunge.
As the chart below shows, its price-to-sales ratio is more than twice that of ExOne's and more than two-and-a-half times that of the more established industry first-movers, 3D Systems and Stratasys. And its forward P/E is nearly triple ExOne's, and about six times that of the two larger 3-D printing companies.
|
Company |
Market Cap |
Annual Revenue (mil) |
Price/Sales |
P/E |
P/E (frw) |
Operating Margin (ttm) |
Profit Margin (ttm) |
|---|---|---|---|---|---|---|---|
|
3D Systems |
7.5B |
460.2 |
16.1 |
159 |
55.5 |
18.7% |
9.6% |
|
Stratasys |
5.7B |
400.5 |
14.2 |
N/A |
49.2 |
(2.6)% |
(7.3)% |
|
ExOne |
770M |
41.5 |
18.6 |
N/A |
121 |
(0.7)% |
(5.7)% |
|
Voxeljet |
559M |
13.3 |
39.6 |
N/A |
326 |
0.6%* |
(2.0)%* |
Sources: Yahoo! Finance; voxeljet's third-quarter earnings report. *For nine-month period through Sept. 30.
This doesn't mean voxeljet couldn't grow into its valuation, nor is the run-up in the stock price that caused this overvaluation the company management's fault. It does, however, mean that more extreme turbulence could lie ahead.
The sector's bigger picture
Investors in the other 3-D printing companies that dropped in sympathy with voxeljet should remember that there didn't seem to be any relevant news related to 3D Systems, Stratasys, ExOne, or the sector's future prospects to account for these declines.
While 6% through 10% weekly drops are fairly sizable, the year-to-date 2013 returns put this turbulent week in its proper perspective (ExOne has only been public since February):
Data by YCharts
The Foolish takeaway
In my opinion, potential investors in voxeljet shouldn't dive in yet. The stock's valuation is still sky-high, even when compared to other momentum stocks. More importantly, given its small size and relatively few 3-D printers on the market, it's too early to tell how successfully voxeljet will compete in the sector. Wait at least one quarter, perhaps two, to see whether its promise of growth seems to be on track.
As to investors in the other 3-D printing companies, there's no reason why you shouldn't stay the course -- unless something has changed to alter your view of your company's and/or the sector's future prospects.
