As I talk about 3D printing stocks, I am reminded of a Harvard Business Review article (The 3-D Printing Revolution) that was published in May 2015. The article talked about industrial 3D printing being at a tipping point.
According to the article, sales of industrial-grade 3D printers in the United States were already one-third the volume of industrial automation and robotic sales. The story, referencing the previous year’s data projected that figure rising to 42% by 2020.
It finally seems that the 3D printing industry has come of age.
Looking at some numbers, it’s estimated that the 3D printing market will grow at a CAGR of 29.48% between fiscal year 2018 and FY2026. Another estimate points to a market size of $34.8 billion by FY2024.
Clearly, growth seems to be gaining traction for the 3D printing industry, and there are some attractive investment opportunities.
Let’s talk about four 3D printing stocks that can be value creators if industry growth accelerates in the next few years.
4 of the Best 3D Printing Stocks of 2021: Stratasys (SSYS)
After soaring to highs of $56.95, SSYS stock has cooled-off and currently trades just above $27. SSYS stock is among the top stocks in the 3D printing business and it seems to me that current levels are attractive for exposure.
Earlier this month, Stratasys reported fourth-quarter results for 2020. The company beat estimates with a surprise profit of $0.13 per share. Further, the guidance for the first two quarters is largely in-sync with analyst estimates.
More than the near-term revenue or earnings outlook, I am bullish on the company’s innovation and diversification. For example, the company recently unveiled a 3D printer to serve the growing demand in the dental industry.
Similarly, the company’s acquisition of RP Support will help in making inroads in the industrial stereolithography 3D printers and solutions segment. It’s worth noting that 3D printing solutions have applications in industries that include aerospace, automotive and consumer electronics.
There is a big addressable market and the company’s top-line growth is likely to accelerate in the coming years.
From a financial perspective, I like the fact that the company reported positive operating cash flow (OCF) of $27.8 million in FY2020. As OCF accelerates, SSYS stock is likely to trend higher.
On March 3, Stratasys announced a public offering for gross proceeds of $200 million. The liquidity buffer implies that the company is fully financed for the next 12-24 months.
ExOne (XONE)
Even after correcting from all-time highs of $66.48 to current levels around $32, XONE stock is high by 591% on a one-year basis.
Revenue from government and defense customers has increased six times since FY2019. If ExOne can continue to secure government orders, this is a big addressable market in itself.
Further, there potentially could be big government orders that boost the company’s backlog. As of Q4 2020, the company reported a total order backlog of $39.4 million.
From a growth perspective, ExOne is an innovator with 230 issued and pending patents globally. The general industrials and automotive sector are the other big markets for the company. It’s likely that revenue will continue to accelerate.
For the second half of FY2020, the company reported a robust top-line growth of 20%. In the current year, top-line growth is likely in the range of 15% to 25%.
On the flip-side, the company is still reporting operating level losses. Further, cash used in operations was $13.8 million in FY2020 as compared to $5.3 million in FY2019. It remains to be seen if the company can deliver improved margins in the current year.
With the cash burn, it’s important to look at the liquidity profile. As of December 2020, the company reported a cash buffer of $59.7 million.
Additionally, the company received net proceeds of $95 million from the February 2021 public offering. Liquidity is not a concern, but the company needs to deliver on the margin front for XONE stock to trend higher.
3D Printing Stocks: Proto Labs (PRLB)
PRLB stock is probably among the most attractive names in 3D printing. However, it makes sense to gradually accumulate with the stock trading at a forward price-to-earnings-ratio of 65.1.
As an overview, Proto Labs is a manufacturer of custom components. The accelerated manufacturing of these custom components is done with the use of automated 3D Printing. I would call this next-generation manufacturing where custom parts can be created in as little as 24 hours.
The company’s largest customer base is from the health care and computer electronics industry. However, the company also caters to the aerospace and automotive segment.
For FY2020, the 3D printing segment reported revenue of $61.4 million, which was higher by 15% on a year-over-year basis. Injection molding and CNC machining are the other key segments of the company.
In January 2021, Proto Labs acquired 3D Hubs, which is an online manufacturing platform. This acquisition is likely to accelerate top-line growth. For FY2020, 3D Hubs reported revenue of $25 million. The company’s revenue has grown at a CAGR of 200% since FY2017.
Overall, PRLB is an attractive long-term bet. However, valuations look stretched and further correction is likely. It also makes sense to look for top-line growth acceleration before a big exposure to the stock.
voxeljet AG (VJET)
VJET stock is a small-cap name in the 3D printing industry. Currently, the stock trades at a market capitalization of $96 million. The stock is already higher by 198% in the last year. Positive industry tailwinds can imply further upside.
As an overview, voxeljet AG is focused on large-scale, series 3D production. To its credit, the company has long-term relationship with some blue-chip clients that include BMW (OTCMKTS:BMWYY), Nike (NYSE:NKE), Ford (NYSE:F) and Daimler (OTCMKTS:DDAIF), among others.
It’s worth noting that the company’s business is from sectors like automobile, aerospace and heavy machinery, among others. However, voxeljet AG is looking for new business applications in the areas of consumer goods, electronics and services. Inroads in new markets can help in accelerating growth.
Further, the company is commercializing its large production polymer 3D printer VX1000 HSS in the current year. A swelling order backlog can trigger VJET stock upside. Overall, the small-cap stock is attractive for some exposure. If the company can deliver steady growth, VJET stock can be a potential portfolio catalyst.
On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modelling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.
