How High Can 3D Systems Fly?
Shares of 3D Systems (NYS: DDD) hit a 52-week high recently. Let's look at how it got here and whether clear skies are ahead.
How it got here
The 3-D printing market is on the rise, and 3D Systems is one of the few companies tapping its growth. The sector's promising prospects are why both 3D Systems and primary rival Stratasys (NAS: SSYS) are official Fool premium newsletter recommendations, after all. Both companies have delivered market-thumping gains for those subscribers who picked up shares.
3-D printing continues to approach the consumer market. While there's still a ways to go before the technology is easily accessible to everyone, it's on its way. The technology is set to transform manufacturing in the coming years.
Last year 3-D systems saw printer shipments jump nearly 250% over the prior year, and it predicted rosy guidance of $330 million to $360 million in sales this year, the midpoint of which would represent a 50% increase over 2011 revenue.
This week, shares of 3-D Systems popped when Stratasys announced that it was merging with Israeli company Objet, which promises to further invigorate the sector through customer awareness of 3-D printing and rapid prototyping. There's nothing like some good old M&A news to boost a sector.
Let's add in a couple fundamental metrics for more insight.
Sales Growth (MRQ)
Net Margin (TTM)
Source: Reuters. TTM = trailing 12 months; MRQ = most recent quarter.
Looking at these metrics, 3D Systems looks more attractive than Stratasys, which may explain why it's enjoyed larger gains over the past five years. However, the Objet merger that was just announced is a pretty major deal; Stratasys shareholders will own 55% of the new combined company, while Objet CEO David Reis will lead the way.
A merger this big will dramatically change the company (and its fundamental metrics), as well as the competitive landscape, if and when the deal closes.
3D Systems is somewhat acquisitive, having recently closed the acquisitions of Z Corp and Vidar Systems, My Robot Nation, and Paramount Industries, just to name a few. Goodwill and net intangibles are bound to begin swelling as it continues picking up smaller companies, but at the end of last year the company was carrying $161.7 million of goodwill and net intangibles -- 35% of total assets.
I think the broader sector is set to continue growing, with both 3D Systems and Stratasys riding the wave, so I'm also going to give both companies an outperform CAPScall today.
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At the time this article was published Fool contributor Evan Niu holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of 3D Systems. Motley Fool newsletter services have recommended buying shares of Stratasys and 3D Systems. 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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