ExOne IPO Is Printing Big Early Returns

This stock's too hot right now, but it's an attractive company

   

It’s not out of the realm of possibility that you haven’t even heard of 3D printing, but the technology and the companies behind it have gotten hot, and fast. Players like 3D Systems (NYSE:DDD) and Proto Labs (NYSE:PRLB) have clocked huge gains over the past year.

Today the IPO market caught 3D fever, too. 3D printer ExOne (NASDAQ:XONE) pulled off a successful offering, with the company first upping the price range from $14-$16 to $16-$18, then pricing the deal on the top end of the latter range. The excitement continued once shares hit the market, with XONE up nearly 30% in early trading.

That success is in stark contrast to ExOne’s roots, which included a restructuring just a couple years after its founding in 2005. S. Kent Rockwell, a venture capitalist and entrepreneur, backed the company with $41 million of his own money! He saw that ExOne had lots of potential but needed to rethink its model, including adopting a focus on the industrial market.

ExOne started to build machines that took digital designs — such as those from CAD systems — that were bound to materials; the machine then would manufacturer new products. A key benefit of this approach was lower costs because the flexible design capability allowed for more efficient products. Waste also was lower because of just-in-time inventory. Very “Industrial Manufacturing 2.0.”

Still, adoption wasn’t quick, so ExOne developed its own production centers where potential customers could co-develop products — something of a “try before you buy” approach.

That helped ExOne take off. The company now sports customers like Ford (NYSE:F), Tesla Motors (NASDAQ:TSLA) and Boeing (NYSE:BA), with machines being sold from anywhere between $350,000 to $1.5 million. The company also generates revenues from services and consumables.

Growth has been strong on the revenue side, with sales climbing 27% to $15.9 million in the first nine months of 2012. The company did slide back to a $10 million loss from $3 million during the same period a year ago, but don’t worry too much about that — ExOne still is in growth mode, and thus needs to make investments to capitalize on the opportunities. Lately, the company has been expanding its sales force and adding capacity.

But as good as it looks, investors should keep their hands off for now. It’s not uncommon for hot IPOs to fizzle a bit, even if the company (and investment) itself is a good one for down the road.

And ExOne is such an investment. Wait for a pullback, and use XONE to play the 3D printing megatrend.

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders.” Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/ipo-playbook/exone-ipo-printing-3d-profits/.

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