Top-Line Growth Makes This Company Work Like 3-D Printing of Money

November 4th, 2013
in contributors, syndication

Written by , Profit Confidential

As evidence of the continued growth in three-dimensional (3D) printing machines, 3D Systems Corporation (NYSE:DDD) out of Rock Hill, South Carolina reported very good financial results in its latest quarter.

Investors went into the quarter with high expectations, and in spite of some difficulty in translating revenue to the bottom line, 3D Systems looks well-positioned for more capital gains on the stock market.

Follow up:

According to 3D Systems, its third-quarter sales grew 50% to a record $135.7 million: 3D printer sales and related products jumped 76% to $59.8 million; print material sales grew 30% to $33.2 million; and services sales grew 38% to $42.7 million. Earnings for the company grew to $17.7 million, or $0.17 per diluted share, compared to $13.5 million, or $0.16 per diluted share.

The company continues to invest heavily in new research and development. Third-quarter shareholders' equity almost doubled while the company's cash balance soared on newly issued shares.

According to management, the company's 3D printer unit demand tripled since last year. The company increased its full-year sales forecast to between $500 and $530 million, but lowered its non-GAAP earnings-per-share guidance to between $0.93 and $1.03, due to increased spending on research and development as well as new marketing initiatives. The company's previous adjusted earnings-per-share forecast was between $1.05 and $1.20.

Naturally, real economic growth comes at a price. 3D Systems is expensively priced on the stock market and should remain this way as institutional investors continue to accumulate shares. 3D Systems' five-year stock chart is featured below:

3D Systems Corporation Chart
Chart courtesy of - Click to enlarge

As is often the case, you get what you pay for when investing. While equity valuations for the new batch of 3D printing companies are overdone, the marketplace can keep it that way for a considerable period with such little choice among real growth stocks.

I think every speculative investor should dedicate some effort to following a stock or two related to this new industry. Previously, we looked at The ExOne Company (XONE), which is a new listing with a lot of potential going forward. (See "This New Trend in Printing a Boon for Tech Investors?")

3D Systems is already trading at its median Wall Street price target. The company's 2014 forward price-to-earnings ratio is currently around 45.

Quite likely, a growing company like this will come back to the equity market to raise more money for further expansion. Taking a position in a business like this is a high-risk trade; but then again, it's very difficult these days to find such strong financial metrics.

I like a company that's investing heavily in research and development and marketing initiatives. New technology doesn't sell itself.

3D Systems ranked second in Fortune magazine's 2013 list of fastest-growing companies. The company is making small acquisitions, getting new ideas and talent related to its core business.

In spite of trading right at its record price high on the stock market, this position is likely to keep ticking higher, with continued strong interest from institutional investors.

A version of this article with the title Top-Line Growth to Keep This Tech Company Ticking Higher was originally publish at Profitconfidential.

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