3D is A Safe Bet in a Volatile Industry
3D Systems (NYSE:DDD), a 3D printing company, has the potential to revolutionize the manufacturing process in the long term. Currently, the main market for 3D printing is prototyping. Consumer printing holds growth prospects for the companies in the 3D printing industry. However, the most potent growth factor in the long term will be the ability to print in a cost effective and time efficient method. Speed of printing is the major barrier for the mass production of different objects.
Shares of 3D Systems are trading at almost three times higher than its growth prospects. PEG ratio is around 3.5x which means that investors are paying 3 times the growth factor of the company. In my recent update on 3D Systems, I advised investors to stay clear of any IBM buyout rumors but still buy the stock for its 3D industry leadership. Since then the shares have appreciated approximately 15% despite the negative sentiment surrounding 3D stocks such as Organovo (NYSEMKT:ONVO), Voxeljet (NYSE:VJET), and others. The company has made a few very interesting moves in the last couple of weeks and has further cemented itself as the safest 3D player in the market.
3D Systems was recently involved in the acquisition of two rather small companies; Village Plastics and Figulo Corporation.
Village Plastics is focused on filament based materials including 3D printing of those materials. Its portfolio includes ABS, PLA and HIPS 3D printing material. Village Plastics Co. is a family operated business dedicated to exceeding customers' expectations.
3D Systems "plans to immediately integrate Village Plastics' materials and manufacturing technologies to accelerate the development of advanced filament-based materials for its growing Cube® and CubeX™ 3D printers". Moreover, Village Plastics' existing customers will be "provided full access to [3D Systems'] complete portfolio of design-to-manufacturing products and services". The company will gain synergistic benefits as the filament materials experience would complement the print offerings of 3D Systems. "Village Plastics brings significant filament-based material development know-how and large scale manufacturing expertise that are vitally important to our Cube 3D printer consumer and prosumer growth initiatives," said Avi Reichental, President and CEO, 3D Systems. "With the Village team on board, we expect to be able to enhance the profitability of this growing category and fast track the delivery of new high-performance filament-based products for the benefit of our users worldwide."
Figulo Corporation is a provider of 3D printed ceramics to a wide range of customers including artists, designers and architects. The company offers ceramic products including tableware, kitchenware, tiles and bathroom ceramics. 3D Systems plans to "immediately integrate Figulo's 3D printed ceramics into its Cubify® ecosystem and its professional cloud printing service, Quickparts®, and to leverage Figulo's considerable ceramics materials and process knowledge to enhance the commercialization of its own line of end-user ceramic 3D printers for home décor labels, pottery shops, artists and hobbyists." The cloud based ceramic manufacturing model will enhance the 3D printing ecosystem of 3D Systems. "With Figulo on board, we are enhancing both our Cubify and Quickparts capabilities and significantly expanding our materials and process expertise and know-how to fast track the commercialization of ceramic 3D printers," said Reichental.
By going through the details of the acquisitions it is relatively clear that 3DSystems is trying to address the consumer printing market along with its prototyping business. These two acquisitions are a positive move as both Village Plastics and Figulo will enrich the material base of 3D Systems. Figulo brings the added advantage of ecosystem enhancement, i.e. the cloud based printing model. The ceramic décor business is a good acquisition because it has growth potential as far as consumer printing is concerned. The consumer printers of 3D Systems are ranked among the top 3D consumer printers. Hence, the move to focus on consumer printing is sensible and 3D Systems will benefit from the growth in consumer printing in the coming years.
3D Systems unveiled its new products at EuroMold 2013 held in Frankfurt, Germany. The company introduced 12 new products including two new production 3D printers; ProX™ 500 and ProX™ 950 SLA System. The latter is amongst the largest and fastest 3D printers available today.
The launch of ProJet® 1200 is worth mentioning. Tagged with a $4900 price, it is targeted towards professionals like dentists, jewelers and electronic components makers. This printer uses 3D Systems' new VisiJet® FTX Green material (a durable and rigid material that is tailored for plastic prototyping and casting patterns) making it ideal for jewelers, dental labs, and designers of very small detail products such as collectibles and electronic component parts.
The GeoMagic capture and the consumer oriented Sense 3D scanner will also assist the company in improving its printing ecosystem. Consumers and professionals will upload models by scanning and a whole wide range of models will become available on the 3D cloud.
Overall, the EuroMold offerings further strengthened the portfolio of 3D Systems.
3D Systems is turning its attention towards consumer printing, as the recent acquisitions indicate. Consumer printing has growth potential and the company is moving in the right direction by entering into ceramics along with the filament materials business. Cubify is already in the market's spotlight. Any favorable growth conditions in consumer printing will directly benefit 3D Systems as it is well positioned to compete with MakeBot, Stratasys' (NASDAQ:SSYS) consumer printing business. In our opinion, the recent acquisitions by 3D Systems make it an even stronger candidate in the consumer printing market. On the commercial front, the company offers a wide range of products including products differentiated form its competitors. Therefore, I believe the 3D industry is growing and 3D Systems will capitalize on that growth and will continue to witness improving valuations. The biggest hurdle for entire industry is the speed of 3D printing and cost of materials; with its rich patent portfolio, 3D Systems is best placed to break that barrier.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.
Additional disclosure: Equity Flux is a team of analysts. This article was written by our Technology analyst. 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.