Could 3D printing be the 'next big thing'? There are certainly many investors that believe so. In the past year, interest in 3D printing has surged. 3D printing has the potential to revolutionize manufacturing and disrupt every industry it enters. Already, 3D printers have printed sculptures, bones, guns, lamps, and just about every other object you can think of. The technology seems unbelievable. But 3D printing is proven, and there are numerous 3D printing companies in operation right now, with real revenue. Many of these stocks have surged recently and could be set for even bigger gains in the years to come.
With all the exciting new developments in 3D printing technology, it's no wonder that this industry is capturing attention. According to Google Trends, searches for "3D printing" have increased over 5 times since the beginning of 2011:
This article will not focus on the science behind 3D printing, and how it works; those interested can read up on it themselves. Rather, I will give a simple rundown of some interesting 3D printing related stocks that offer various different products, which I believe are worth investigating for anyone interested in this industry.
I believe that the three most exciting upcoming stocks involved in the 3D printing industry are Organovo Holdings Inc (ONVO), Cimatron Ltd. (CIMT) and Perceptron, Inc. (PRCP). Between them, these companies have a range of different products related to 3D printing. ONVO uses 3D printing technology for human tissue development, CIMT develops software that aids in 3D printing, and PRCP offers 3D scanning technologies. ONVO, CIMT and PRCP also offer more volatile, risky and potentially greater returns compared to the 3D printing industry leaders 3D Systems Corporation (DDD) and Stratasys, Ltd. (SSYS).
Overview of Industry Leaders 3D Systems Corporation and Stratasys, Ltd.
DDD and SSYS are the two biggest players in the 3D printing industry. Both companies have similar market caps (over $3 billion each), and have made significant moves in the past month. The two companies are in direct competition and a decision to invest in one or the other must be made after extensive due-diligence and examination of the two companies financial statements and products.
While DDD and SSYS have similar valuations, their financials and revenues are quite different. In their latest 10Qs, for September 30th 2012, DDD has far more cash ($183,931,000) and total assets ($660,518,000) than SSYS (which has cash of $27,899,789 and total assets of $244,899,287) but also far larger liabilities (DDD has total liabilities of $244,028,000 while SSYS' total liabilities stand at $41,019,227). DDD also has larger revenue and net income than SSYS for the nine months ended September 30th 2012.
I believe DDD and SSYS are both worthwhile options for investors who wish to invest in the 3D printing industry over the long term. For those seeking 3D printing related plays with far lower market caps, more risk and potentially far greater returns, the following three stocks are worth investigating.
Speculative 3D Printing Related Play #1: Organovo Holdings Inc
ONVO has had an impressive run over the past couple of weeks. This stock was alerted by Timothy Sykes of Pennystocking Silver in the low $2's, shortly before its multi-day run up to nearly $4, and many other traders were also expecting a run-up in the near future. This was sent to Tim's subscribers on the 24th December:
"ONVO I had to buy at 2.15 because 3d printing leaders DDD and SSYS just keep going and one day, ONVO will also spike... it's just a matter of time so I want to be there invested and ready to sell into any big spike."
Organovo Holdings is focused on utilizing 3D printing to generate human tissues that can be used for research purposes or treatment. According to their investor page, ONVO is the first stock to have three dimensional tissue technologies. Their latest 10Q was on November 14th, 2012, when for the nine months ended September 30th 2012, revenues were $848,213 and loss from operations was $6,396,501. As of September 30th 2012, the company had an accumulated deficit of approximately $40,679,200.
While there is no arguing that ONVO's financials are unattractive, it must be remembered that ONVO is still very much a development stage company and much of their expenses are related to research and development. And most importantly for their stock price, it's operating in an extremely exciting field. I believe ONVO's powerful run-up in the past couple of weeks is not due to any material developments of the company, but rather the hype surrounding 3D printing and the fact that ONVO has a 3D printing-related product with enormous potential.
Despite its poor financials and recent big run-up from the low $2s to $4, I would not be surprised to see even stronger movement on ONVO this month or next. It is important not to underestimate the power of hype and speculation in an exciting new industry. A decent press release or some news on the company may be all that's required for ONVO's second big move up. For this reason, I am not going to short ONVO. However, I would certainly advise against going long on ONVO at this point. The time for that was clearly in the low $2s.
Speculative 3D Printing Related Play #2: Cimatron Ltd.
Compared to other 3D printing stocks, CIMT has a very low market cap and low volume, which can allow it to move very easily. CIMT barely traded at all until the 10th January, when it spiked up to a high of $5.40 from the high $4s on reasonable volume. Since then it has retraced back to the $4s, and volume has subsided again.
CIMT develops software that aids in 3D printing through its two product lines CimatronE and GibbsCAM. While CIMT is not an attractive stock for day traders or scalpers due to its lack of volume, I believe this stock may represent an attractive long term investment. For the third quarter of 2012, CIMT had revenues of $9.5 million, with net profit of around $500,000 (net profits for the first nine months of 2012 were $2.4 million). The company is also well established, with over 30 years of history and over 40,000 software installations.
CIMT stock is currently at its highs for the past few years of trading and I believe that the stock has good odds of continuing to climb, especially if 3D printing continues to grow. While investing is always risky, I believe that the risk of investing in CIMT is (relatively) lower than many other speculative 3D printing plays, as the company already has a proven history.
Speculative 3D Printing Related Play #3: Perceptron, Inc.
PRCP has been gaining momentum recently, having broken $8 after a steady uptrend over the past few trading days. Many traders picked up PRCP shares in the $6s and $7s, expecting PRCP to gain attention along with many other stocks involved in 3D printing, and this is exactly what happened.
It seems that this article ("Why Perceptron Could Be The Next 3D Tech Stock To Triple"), written by a popular trader, was responsible for bringing in some volume to PRCP. The author of that article goes by the online handle of "superman" and has a history of alerting low-float stocks soon before they make moves (superman runs a premium service of alerting stocks here). The article made a strong case for why PRCP was worth buying, citing the companies strong fundamentals and continued growth.
While PRCP may be worth investing in, is important that 3D printing is not PRCP's primary focus. Perceptron offers some 3D scanning solutions on their website, but this is just one small part of their business, and certainly has not been their primary source of revenue. Therefore, those who believe the 3D printing industry is set to explode are advised to consider investing in other stocks which derive the majority of their revenue from 3D printing products and services, and are thus more primed to benefit from a growing 3D printing industry.
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Feel free to contact me if you would like me to investigate a stock for you, or you have comments, feedback or corrections on any information presented in this article.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.