There Is Still 94% Upside For Arcam AB Despite Its 310% Growth During 2013

Aug.29.13 | About: Arcam AB (AMAVF)

The stock price of Arcam AB (OTCPK:AMAVF), a 3D printing company from Sweden, has clearly outpaced the 3D printing industry rivals during 2013. Arcam's stock price has already increased 310% this year but the rally is not over yet. Arcam is in a very good situation with orders coming in steadily and profitability increasing by the quarter. If the near future plays out as I expect, Arcam's stock price will see a 94% growth after the second quarter of 2014 from the current valuation of ~$111.

As said, Arcam has had quite a ride this year. As the chart (from Google Finance) below shows, Arcam stock price has reached new highs almost every month.

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It is very interesting to see how the stock price will develop in the near future but I do have some expectations about Arcam's businesses in the coming quarters. I have presented my expectations in the next chart. I have based my numbers on the values from last year with some annual growth on top of them. Here are the numbers for this year.

2013 (2012) Q4 Est. Q3 Est. Q2 Q1
Order Intake 33 (24) 12 (12) 8 (5) 7 (5) 6 (2)
Delivered Systems 30 (15) 10 (8) 9 (3) 7 (2) 4 (2)
Order Book At Period End 13 (10) 13 (10) 11 ( 6) 12 (4) 12 (1)
System sales $25.9M $9.2M $7.5M $5.8M $3.4M
Aftermarket Sales $9.4M $2.4M $2.4M $2.3M $2.3M
Revenue $35.3M ($21.7M) $11.6M ($10M) $9.9M ($4M) $8.1M ($4.9M) $5.7M ($2.8M)
Revenue Growth 63,00% 16,00% 148% 67% 101%
EPS 0,6 0,5 0,3 0
TTM 1,4 1,39 0,9 0.66
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The latter part of the year will be clearly better than the first half due to large order book that Arcam has currently.

They expect the next four quarters to look like this:

2014 Q2 Est. 2014 Q1 Est. Q4 Est. Q3 Est.
Order Intake 7 (7) 6 (6) 12 (12) 8 (5)
Delivered Systems 8 (7) 7 (4) 10 (8) 9 (3)
Order Book At Period End 11 (12) 12 (12) 13 (10) 11 ( 6)
Revenue $9M $8.1M $11.6M ($10M) $9.9M ($4M)
Revenue Growth 11 % 42 % 16,00 % 148 %
EPS 0.4 0.3 0.6 0.5
TTM 1.8 1.7 1.4 1.39
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As you can see, I expect EPS to reach $1.8 in Q2. As previously, I have based my estimations of the order intake and the amount of delivered systems to the values from 2013.

The following table describes what the stock could be worth during each of the following four quarters.

Q 2014 Q2 2014 Q1 2013 Q4 2013 Q3
EPS 1,8$ 1,7$ 1,4$ 1,39$
PE 80 144$ 136$ 112$ 111,2$
PE100 180$ 170$ 140$ 139$
PE 120 216$ 204$ 168$ 166,8$
PE 150 270$ 255$ 210$ 208,5$
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I expect Arcam to reach forward EPS of $1.8 during the second quarter of 2014. With P/E of 120 this would lead to a stock price of about $216 (94% upside from current price). Currently Arcam's P/E is ~124. Of course, the stock price could also reach $270 if the 3D printing hype continues.

Arcam will release its earnings report for the third quarter on 18th of October.

For further information about Arcam I have collected here a couple of very useful articles. The first two are from Gary "3D Printing Investor" Anderson. The first one discusses Arcam's business on a high level and the second one is a Q&A with Arcam's CEO Magnus Rene.

The third article is from Motley Fool investing site and it is about "a hidden gem among the 3D printers". It describes very well why Arcam is probably the best choice to invest in from the four discussed 3D printing companies.

Arcam has just announced that they have won the Export Hermes award. The award is issued yearly by the Swedish Fund for Export Development. The criteria are a stable and growing export to a global market through a well market strategy and with sustained profitability.

Conclusion

It has been an incredible year for the owners of Arcam. The stock price has increased from $27 to $111 in just 8 months but the stock price will most likely increase a further 94% during the next 12 months. Investing in Arcam is not just a good choice but it is probably the best choice to invest in from all 3D printing companies [Stratasys (NASDAQ:SSYS), 3D Systems (NYSE:DDD) or ExOne (NASDAQ:XONE)]

Disclosure: I am long OTCPK:AMAVF, DDD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.