The 3-D printing industry is expected to develop into the next-gen technology for industrial manufacturing, and investors who are looking to benefit from this trend will shortly have a new option. A German3-D printing company, Voxeljet, filed for an initial public offering (IPO) last month. According to reports, the company is expected to raise roughly $100 million from the IPO. Voxeljet will compete with 3D Systems (DDD), Stratasys (SSYS), and ExOne (XONE) in the 3-D printing industry.
Basic pricing fundamentals like the P/E and the P/S ratio weren't revealed; therefore, the valuation of the company is still a mystery. However, let's take a look at Voxeljet's competitors and its financials, and where exactly the company might fit in this booming industry.
Biggest threat- 3D Systems
The increase in demand for 3-D printing has produced immense opportunities for 3D Systems. The company has appreciated 136% year-to-date and may continue gaining in the future as well. Business consultants expect the 3-D printing industry to grow at a rate of 20% annually, while 3D Systems is expected to attain growth rates which will surpass the industry average.
3D Systems' broad range of products that cater to both the consumer segment and prototyping along with a variety of new technologies and materials give it a competitive edge over its peers. On top of that, 3D Systems has been focusing on acquisitions and has acquired 38 companies so far, the latest being The Sugar Lab. The Sugar Lab focuses on 3-D printing of real sugar and will help 3D Systems widen its product offering.
Also, 3D Systems has been releasing an assortment of new products and software that have performed well in the marketplace. All these strategic moves have enabled the company to record a staggering increase of more than 100% in its printers and other products revenue.
All these implementations also saw 3D Systems establish itself as the cream of the crop in Credit Suisse's coverage. 3D Systems' coverage was initiated with an outperform rating and a price target of $62. Given that the 3-D printing market is estimated to be worth more than $10.8 billion by 2021, its highly probable that the company will continue to outperform the market.
Second-string competitor- Stratasys
Credit Suisse initiated the coverage of Stratasys with a Neutral rating with a price target of $103. Stratasys has been playing second-fiddle to 3D Systems as the company has only witnessed an increment of 30% in its share price, year-to-date. Earnings of Stratasys are projected to grow at a CAGR of 10%, which is well below the industry average of 16%.
Julian Mitchell of Credit Suisse stated, "Stratasys has undertaken some major portfolio moves in the past 12 months, including the merger with Objet Systems (which added the PolyJet printing method as well as a strong Far East sales presence) and the recently closed acquisition of Makerbot (providing a strong position in consumer markets)."
Stratasys' presence in the booming consumer and desktop market is weaker than 3D Systems; therefore, this acquisition will help it strengthen its presence in the market and provide stiff competition to rivals. Makerbot recently launched a really affordable and user-friendly desktop 3-D scanner called Digitizer. This platform will enable users to miniaturize objects to make digital 3-D models. The multiple advantages of Digitizer will increase its demand and will also enable the company to proficiently challenge 3D Systems' Cube 3D printer.
ExOne down, two to go
Voxeljet, possibly, will struggle to outdo 3D Systems or Stratasys anytime soon, but it may be able to overtake ExOne. There are many similarities between ExOne and Voxeljet's business structure, but Voxeljet can surpass ExOne. ExOne has been performing terribly as the company's share price has declined approximately 40% in about two months.
Credit Suisse started ExOne's coverage with an Underperform rating with a price target of $48. Mitchell said, "We see three key downside risk to consensus sales growth assumptions:
1) uptake of the core technology is liable to be constrained by lack of CAD penetration in Asia (where XONE has higher exposure than peers); 2) there is a need for significant post processing in metals (unlike competing technologies); 3) revenues are highly cyclical, given full exposure to industrial markets and minimal materials 'tail' following a system sale."
Missing consensus estimates regularly has take its toll on the company and the rating is well justified. Voxeljet has invested heavily in research and development and has many competitive advantages over ExOne. The company claims that its competitive advantages include high printing speed, size of its printing platform, and volumetric production rate of its printers.
Voxeljet has witnessed a growth of 35% in its top-line from 2010-2012 and also posted a decent profit of $278,000 in the previous year. Much of this can be attributed to Voxeljet's customers like Ford, 3M, BMW etc.
Voxeljet could very well slot in behind ExOne in the 3-D printing race and could turn out to be a potentially attractive investment. However, until and unless there is clarity on pricing, investors should wait and not buy it just on hype.