Proto Labs (PRLB) — This company manufactures computer numerical control (CNC) machined and injection molded custom parts for prototyping and short-run production. At the forefront of the 3D printing industry, it has a high P/E ratio, and therefore, could become very volatile.
The company earned $1.07 per share in 2012 and is projected to earn $1.43 in 2013 and $1.73 in 2014.
On Oct. 1, I said, “Technically, PRLB is in a powerful bull channel with a top around $80 and support at $70.50. This stock should not be chased, but in an uncertain stock market, it will almost certainly appear on the lists of savvy buyers who will bargain-hunt during a general market correction.
“A pullback to $70 could be the level to make a one-third commitment, continuing to add on further declines to its 200-day moving average at $55. Long term, PRLB could provide an enormous return.”
On Oct. 9, the stock fell to a low of $68.29, and then quickly reversed. Trade of the Day followers should now be long a one-third position.
Following the pullback, PRLB broke above its bull channel, and so it is appropriate to add another one-third to the position. A final third should be added on either a break to a new high or a pullback to the 50-day moving average at $76 as a long-term investment.
The company is scheduled to report quarterly earnings before the market opens on Thursday, Oct. 31.