A Winning Strategy for Stratasys

Wall Street can't generate enthusiasm for 3-D printing specialist Stratasys , so why do our Motley Fool CAPS members disagree? Nearly 900 members of the investor-driven community have weighed in on its prospects, and 95% of them see it outperforming the broad market averages, bestowing on it high honors with a four-star rating. In contrast, more than a third of the 11 analysts rating it believe it will sink.

So who has it right? The professional class of analysts sitting in their paneled offices smoking stogies, or a motley community of investors pooling their best thoughts for others to share? We think we know who'll come out ahead. How about you?

Stratasys snapshot

Market Cap

$1.8 billion

Revenues, TTM

$188 million

1-Year Stock Return

132.7%

Return on Investment

9.3%

Estimated 5-Year EPS Growth

21.3%

Dividend and Yield

N/A

Recent Price

$84.32

CAPS Rating (out of 5)

****


Source: FinViz.com. N/A = not applicable; Stratasys doesn't pay a dividend.

Of course, as much as we love our CAPS community, don't buy a company just because its garnered top ratings. And don't sell it just because Wall Street says to either. Investing requires closer diligence on your part, so use a stock's CAPS rating as a launching pad for your own research.

A perfect storm
I've mused in the past that the 3-D printing industry will survive only to the point that the printers start printing out copies of themselves. While it's unlikely they'll ever be able to create a fully functional machine since they only spit out static pieces, RepRap, an open-source 3-D printer, seems to have come the closest, as it encourages users to print out parts to assemble other RepRap printers, which in turn has led to the rise of other open-source rivals Ultimaker and MakerBot, two other printers challenging the business models developed by Stratasys and 3D Systems .

But those printers come at a price: MakerBot offers two flavors, one for $2,799, the other for $2,199. That's expensive compared with the near-$1,000 price point 3D Systems' Cube goes for, and which could really bring 3-D printing to the masses.

Stormy seas
Yet Stratasys is different from its rivals as its printers are really geared for the enterprise level user, which has no time for Erector Set-style hobby machines. Its printers are used in aerospace, defense, automotive, medical, business and industrial equipment, and consumer products, with Boeing , Intel , Ford , Xerox , and Nike all buying systems from Stratasys.

Revenues last quarter surged 24% to $49.7 million, aided by a 27% jump in system sales and a 13% increase in services, leading to an 8% rise in operating profits. Three-dimensional printing has reached a tipping point and has become almost mainstream. It creates broad awareness, even if the average person has little need for such a printer at the moment, driving prices down and creating a cycle of innovation. Office-supply leader Staples recently announced that it will be offering 3-D printing services in-store.

While a company like Boeing has produced more than 20,000 3-D printed parts (as of last year) that it's delivered to military customers, the technology is going beyond even some futurists' wildest imaginations. If you think genetically modified foods created a firestorm of controversy, what would you think about 3-D printed meat? PayPal founder Peter Thiel is investing in Modern Meadow to develop a viable "bioprinting" company to create food for the masses.

Looking for safe harbor
Three-dimensional printing is expected to grow into a $3 billion industry by 2016 and could expand to more than $5 billion by 2020. Despite the rise of open-source rivals, Stratasys and 3D Systems will likely still be the major players, with others such as Dassault Systems , Arcam , and even AutoDesk helping to grow the industry.

Because of its concentration with enterprise-class clients, who will have greater and more sustained use for additive manufacturing than a mom who wants to print Legos for her kid, I see Stratasys as continuing on its upward trajectory, even if at current prices it's at nosebleed valuations. But let me know in the comments section below whether you agree that its ultimate success is still fit to print.

Nothing wrong with that!
3D Systems is at the leading edge of a disruptive technological revolution, with the broadest portfolio of 3-D printers in the industry. However, despite years of earnings growth, 3D Systems' share price has risen even faster, and today the company sports a dizzying valuation. To help investors decide whether the future of additive manufacturing is bright enough to justify the lofty price tag on the company's shares, The Motley Fool has compiled a premium research report on whether 3D Systems is a buy right now. In our report, we take a close look at 3D Systems' opportunities, risks, and critical factors for growth. You'll also find reasons to buy or sell, and receive a full year of analyst updates with the report. To start reading, simply click here now for instant access.

 

The article A Winning Strategy for Stratasys originally appeared on Fool.com.

Rich Duprey owns shares of Intel and Nike. The Motley Fool recommends 3D Systems, Ford, Intel, Nike, and Stratasys, owns shares of 3D Systems, Ford, Intel, Nike, Staples, and Stratasys, and has options on 3D Systems. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


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