Investing in 3D printing stocks is an exciting prospect for investors to consider. The technology offers the potential to revolutionize the way things are made, and the industry is projected to grow significantly in the coming years. This powerful combination fueled investor enthusiasm that the Third Industrial Revolution -- a term coined by The Economist in April 2012 -- was just around the corner.

The following chart illustrates how the largest 3D printing stocks by revenue and market capitalization, 3D Systems (NYSE:DDD) and Stratasys (NASDAQ:SSYS), have performed since The Economist article was published. Suffice it to say, it's been a wild ride.

SSYS Chart

SSYS data by YCharts.

Looking back, it appears that investor optimism toward 3D printing stocks got pushed to extremes, and created an environment in which they couldn't live up to their ever-growing expectations. However, despite the volatility that has ensued during the last three years, the long-term prospects of the 3D printing industry remain intact, which is a good reason for investors to keep an eye on 3D printing stocks.

According to Wohlers Report 2015, a leading 3D printing industry insights publication, the 3D printing industry generated $4.1 billion in worldwide revenue in 2014, and is expected to grow by more than 31% per year until 2020, eventually surpassing $21 billion in annual revenue.

Read on to find out why investors should consider 3D Systems, Stratasys, and Hewlett-Packard (NYSE:HPQ) as top 3D printing stocks to watch.

The industry leader
Since the inception of its MakerBot, Objet, and Stratasys brands, Stratasys has sold a grand total of 129,197 3D printers through the first quarter, the vast majority of which are still in operation today. This market-leading installed base feeds the company's razor-and-blade business, in which the 3D printers it sells are the razors, and the materials they consume over their lifetimes are the blades.

At the end of the day, Stratasys' large installed base sets the company up to generate long-term streams of recurring revenue from the repeated sale of consumables, which tend to carry higher gross profit margins than 3D printing hardware. In the first quarter, the company's consumable revenue grew by 18% year over year, or 25% on a constant-currency basis. Management attributed this growth to more use of its 3D printers, and from expanding its installed base of 3D printers.

Looking ahead, if Stratasys can maintain its market-leading installed base, it should help the company remain relevant in the industry for years to come.

A close second
What 3D Systems lacks in installed base, it makes up for in being the most diversified 3D printing company in the industry. In total, 3D Systems has seven distinct technologies in its portfolio, which theoretically should allow it to cater to a wider variety of applications than its competitors do.

Unfortunately, in practice, 3D Systems' jack-of-all trades approach has been plagued with a myriad of execution issues that suggest that management's focus on operational efficiency has taken a backseat to building a highly diversified 3D printing company. After all, the company has made more than 50 acquisitions in the last four years, which has inadvertently created many points of friction between itself and the various businesses being acquired.

However, despite these challenges, 3D Systems remains a 3D printing stock to watch because it's a close second to Stratasys in terms of the annual revenue it generates, and has $199 million in cash on its balance sheet that could be used to improve its operations and enhance its competitive positioning.

The sleeping giant
With plans to enter the 3D printing space in late 2016 with a homegrown, inkjet-based 3D printing technology that it's calling Multi Jet Fusion, HP is a must-watch 3D printing stock.

Multi Jet Fusion leverages decades of inkjet experience, which HP claims is 10 times faster than today's leading extrusion-based and selective laser sintering technologies. From a customer point of view, an order-of-magnitude increase in speed could prove to be a compelling value proposition in industries where reducing lead times lowers the cost of developing parts and products.

Source: Hewlett-Packard.

Beyond Multi Jet Fusion's disruptive potential, HP has a tremendous amount of cash, sales experience, and brand recognition that could be used to dilute the efforts of other 3D printing stocks. To put HP's nearly $14.8 billion cash hoard in perspective, it could be used to acquire -- if it desired -- both 3D Systems and Stratasys at 100% premiums above their current stock prices, and still have more than $6 billion in cash left over.

Although the actual risk that HP poses to 3D printing stocks is impossible to calculate, it's clear that HP wields a lot of power to shake up the industry.

Building a watch list
When building a watch list for 3D printing stocks, it's important to include companies that will likely shape the industry in the years to come. With Stratasys' market-leading installed base, 3D Systems' highly diversified business model, and HP's anticipated entrance, prospective investors have a solid foundation of 3D printing stocks to add to their watch lists.

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