The wave of the future in printing is leaning towards the direction of three dimensional printing. Major manufacturers of 3D printers are enjoying the ride up. Leading companies like 3D Systems (NYSE:DDD) and Stratasys (NASDAQ:SSYS) have been upbeat since the start of 2012. They have been profitable, as well. Both 3D Systems and Stratasys show solid financials. They consistently beat estimates quarter over quarter for the past 2 years.
3D printing, actually, has been around since the early seventies. But the companies recently gained rising popularity. 3D printing used to be available only in automotive designs, aerospace, and in several medical settings. But now it gradually invades other industries like construction, engineering, and jewelry, among others. Soon, it may invade the education and the business sectors. Many believe that schools and offices will start using 3D printers in the near future.
Presently, 3D printing has already penetrated the toy manufacturing industry. In fact, in London there are stores selling dolls manufactured using 3D printing technology. Soon, more toys will be made using the same technology amid the declining prices of 3D printers.
The sanguine future of 3D printing got a boost when it was especially highlighted in the speech of US president Barrack Obama. 3D printing was mentioned as a technology that could possibly fuel more high-tech jobs for the unemployed Americans.
About 3D Systems
Year over year, 3D Systems reported increasing total revenue. The fiscal year 2011 ended with $230 million revenue, up by 43% from $160 million in 2010. In 2012, growth in total revenue was higher at 54% when it posted revenue of $354 million.
The net income, on the other hand, also experienced the same steady growth year-over-year. In 2010, net income was posted at $19.5 million. The following year, it saw 81% growth in net income at $35.4 million. However, a slower growth was seen in 2012 at 10% when the company posted net income of $38 million. Nonetheless, 3D systems still showed a good performance with growth in both the total revenue and the net income.
In the balance sheet, 3D Systems lowered its debt exposure. The total liabilities were minimized from $208 million in 2011 to $197 million in 2012. The company's cash and cash equivalent, on the other hand, is $155 million.
3D system's financial performance for 2012 is generally better than its closest peer, Stratasys. But in terms of revenues, Stratasys has robust revenue growth compared to 3D systems. It gained 38% from $156 million in 2011 to $215 million in 2012. But unlike DDD, its net income declined from $20.6 million to $8.5 million with growth of -58%.
In the balance sheet, Stratasys has weaker figures compared to 3D Systems. The total liabilities saw a significant jump from $38 million in 2011 to $160 million in 2012. But similar to DDD, the debt amount seems manageable. Its cash and cash equivalents amounted to $134 million, which is close to its debt level.
Both Stratasys and 3D Systems showed good financials. However, the latter has a better performance in terms of growth in net income and in terms of liabilities. In addition, 3D Systems is slightly stronger in terms of market capitalization at $4 billion versus its peer at $3 billion. It also has higher operating margin of 19% compared to the operating margin of Stratasys at 15%.
While the financials showed 3D Systems having more robust performance, Stratasys showed better performance on the trading floor. The share performances did not seem to take the cue from the financials. Rather, the stocks were traded based on the market outlook and speculations.
Both stocks took a plunge towards the end of the first quarter but eventually bounced back in the second quarter. As of May 10, Stratasys still end up a winner with YTD growth of 2.5% from $81.41 to $83.39 per share.
DDD, on the other hand, is not so lucky enough. It hasn't fully recovered yet from the fall. As of May 10, its growth is -21% from $55.78 on January 2 to $43.85 per share.
Despite the negative year-to-date growth of 3D Systems, the company is still financially strong with great potential to rebound. The 3D printing market has an upbeat outlook backed by an endorsement by no less than the U.S. president himself, Barrack Obama.
In fact, president Obama spoke about his directives to the National Additive Manufacturing Innovations. He recommended a shift in focus on the 3D printing technology from research to day-to-day use. Aside from that, he also announced that three more manufacturing hubs will be added for the globalization of high-tech jobs. This will be in partnership with the Defense of Energy.
Furthermore, he is hoping for support from the Congress for the creation of 15 networks of hubs. This will fuel the manufacturing of products made in America. Thus, the U.S. president is aiming for the increasing independence of America from products made in China.
Alternately, made in America products is encouraged and it should soon fill the retail market of the US. Many of these products will be manufactured using the 3D printing technology. So the market outlook of 3D printing is huge, and the recent bullish run of 3D Systems and Stratasys is probably just the start. Many analysts projected that 3D printing will soon balloon when it hits the mainstreams of the market.
That said, it is best to start securing your position in the 3D market. While DDD and SSYS are generally upbeat for more than a year, there is still no sign of major correction. There might be some slight dips along the way, but the rebounds are also quick.
The upbeat outlook of 3D printing makes it all the more reasons to long DDD. This is backed by recommendations of majority of the analyst firms. The current recommendations are hold, buy, and strong buy.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: Efsinvestment is a team of analysts. This article was written by one of our equity analysts. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.