A Simple Example of the Disruption 3-D Printing Could Cause

Growing up, my next-door neighbor was an Italian immigrant named Jack, who went on to found his own line of frozen pizza. Over the years, his products have gained popularity and spread throughout the upper Midwest.

When it got to the point where forklifts were needed to manage the company's inventory, my dad -- a forklift distributor -- pitched his company's line of products to Jack's son, who was in charge of such things. "Thanks, but we try to make sure all of the tools and ingredients we use come from our native Italy," was the response.

"Fair enough," my dad thought. But he also knew that buying a European forklift meant that if certain parts needed to be replaced, it could take weeks, if not months, for the requisite tools to make it back to the states.


Sure enough, a few years later, my dad got a call. It turned out the pizza company's forklift had been down for almost two months, waiting for replacement parts to arrive. Jack's son decided to make an exception to the company rule, and it turned out to be a win-win for my dad and our neighbor.

Ultimate personalization
Unfortunately for my dad, that kind of advantage -- having the parts on hand to help customers while foreign competitors are thousands of miles away -- may not be around for long.

I've detailed what 3-D printing actually is before, but in a nutshell, it's a process whereby a machine can make a three-dimensional object that is functional for everyday life. A 3-D printer simply needs the specs for a product and the necessary materials (think metal, silicon, or rubber, for example), and a few hours later -- presto! You have what you need.

Jay Leno famously used a 3-D printer for a rare part he needed for one of his vintage motorcycles. In the not-so-distant future, my neighbor's pizza company may be able to use a 3-D printer to make replacement parts and only have to wait hours -- not months -- for its forklift to be up and running again.

You can count dentistry as another industry already being disrupted by this technology, as patients only have to wait a few days (rather than weeks) to get custom-fit parts for their dental needs.

It's pretty clear how everything from an industry based on spare parts to mass manufacturing could be disrupted by this versatile technology. Instead of going out and getting cookie-cutter products, you can tailor your purchases to fit your individual needs.

It's also pretty clear that for investors who want to take part in 3-D printing's potential, there are big opportunities. Currently, two stalwarts are splitting the market: 3D Systems (NYS: DDD) and Stratasys (NAS: SSYS) .

A look at how the companies have performed over the past year might make you think that you've missed the boat if you aren't already invested.

SSYS Chart

SSYS data by YCharts.

But I still think there are solid arguments to be made for continued adoption of the technology. Consider the fact that over the first six months of 2012, Stratasys showed 30% growth in revenue and 23% growth in earnings. Not to be outdone, 3D Systems grew revenue by 57% and earnings per share by 46%.

While each company is trading for lofty valuations -- both have P/Es of about 70 -- there's another crucial number to keep your eye on: market capitalization. I'll be the first to admit that both of these companies look expensive right now, but with market caps less than $3 billion, there's still plenty of room to grow over the next decade.

Consider that some of the world's largest manufacturing companies, like 3M (NYS: MMM) and Siemens (NYS: SI) , have market caps ranging from 30 to 45 times larger than these two 3-D printing companies. By no means am I saying that Stratasys or 3D Systems will grow to replace 3M or Siemens -- only that the disparity in value gives you an idea of how small these two printing companies are at this point.

Which to choose...
You really can't go wrong with either company, but when forced to choose, I have sided with Stratasys. This is largely due to the company's historical focus on organic growth and catering to large-ticket customers -- though it has recently branched out with lower-end printers as well.

The main concern that made me shy away from 3D Systems is that the company has grown via acquisition. It was twist, then, when Stratasys announced that it was merging with Israel-based Objet this past April. For what it's worth, I think it was an excellent move for Stratasys, as it helps the company expand its reach with complementary technologies in varied fields.

To be honest, though, these aren't the only two companies that could capitalize on the 3-D printing revolution. Our top analysts have prepared a special free report to tell you more: "3 Stocks To Own for The New Industrial Revolution." I've already covered two of those companies here, but to find out what the third one is, get your copy of the report today -- absolutely free!

The article A Simple Example of the Disruption 3-D Printing Could Cause originally appeared on Fool.com.

Fool contributor Brian Stoffel owns shares of Stratasys. Motley Fool newsletter services have recommended buying shares of Stratasys, 3M, and 3-D Systems, and creating a diagonal call position in 3M. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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