The 3-D printing sector is one I did a lot of research into in 2013. In my articles I focused on two relatively unknown 3-D stocks and made my case for investment. My first investment idea was large cap stock Xerox Corporation (XRX). In April in my article titled, "3-D Printing Could Lead To A U.S. Manufacturing Resurgence," I highlighted the 3-D technology being developed by XRX. In my article titled, "3-D Stocks Surge Again: On That Is Undervalued And Could See $30," in late August I made the investment case for shares of Cimatron Ltd. (CIMT).
How They Fared
XRX Price April 23 $8.11
XRX High Price $12.28
Potential Gain $4.17 or 50%
This gain does not include three dividend payments of 5.8c each totaling 17.4c that was made during the year. As I mentioned previously in my long term investments, especially in a hot sector such as 3-D, the added benefit of dividend payments is an excellent benefit for the long term holder.
CIMT Price August 26 $6.20
CIMT High Price $9.05
Potential Gain $2.85 or 46%
These are very nice returns for investors, especially the gain seen in CIMT over the last quarter. A lot has happened in the 3-D sector in recent months with market valuations gaining considerably. I still believe that shares of CIMT are undervalued and offer nice upside for investors still wanting to invest in the sector.
On November 12, investors got their first look under the hood since I profiled CIMT and the numbers were great. Some key highlights from the report:
- 45% increase in y-o-y non-GAAP operating profit, to a Q3 record of $1.4 million
- 62% increase in y-o-y non-GAAP net profit, to a Q3 record of $1.1 million
- Record Q3 revenues of $10.3 million, a 9% y-o-y increase
- 88% gross margin and 14% operating margin on a non-GAAP basis
- $0.11 non-GAAP EPS
- $12.9 million end of quarter net cash balance
This report now gives us a player in the 3-D market with a forward PE of only 18.70.
When I wrote about CIMT I based my $30 target on the price to sales multiples in the other 3-D stocks. That analysis is below:
Price to Sales
Since August the prices of the sector has soared, so I decided to take another look at the same number and see where CIMT now stands. The change in the sector has been nothing short of amazing over the last quarter. The average price to sales increase across the sector has been 66%. The largest gain seen in the sector was from the 3-D company with no sales, Organovo Holdings, Inc. (ONVO), at 87%. New IPO voxeljet AG (VJET) has annual sales slightly above the sales CIMT recorded for the last quarter. It trades thirty six times sales. Shortly after its IPO it traded at $70 per shares or 54 times sales.
Price to Sales
Price to Sales
The lowest market cap in the 3-D sector right now is VJET at $467m. This is based on $13m in annual revenue. In contrast CIMT reported $10.5m in revenue in the most recent QUARTER. If CIMT were to be fairly valued at the market cap being afforded the lowest priced peer of $467m that would equate to a price per share of $45. This would also give it a price to sales of only ten. Even at this much higher stock price CIMT shares would still trade at the lowest price to sales number in the sector.
A key item to note for investors still considering an entry in this sector is that CIMT is only one of THREE companies in the sector to be profitable. Despite this fact in the last quarter the market cap of CIMT has only grown by $30m to $91m. It price to sales figure has moved from a reading of ONE to a reading of TWO. This disparity in the price to sales and market cap of CIMT has endured all year. It appears to me however that investors are finally starting to take a close look at CIMT. There is still time for those watching the stock to consider an entry.
Shares of CIMT are still very attractive for investors looking to enter the red hot 3-D market. At the Consumer Electronics Show (CES) in Las Vegas this week 3-D technology is expected to be prominently displayed and talked about. This will only add to the investor interest in the sector. Based on numbers alone, as I have outlined above, CIMT still offers tremendous value for investors. In a sector that only a handful of companies post a PE (PE's in the 200 range) CIMT has a PE of only 18. The company is profitable. It has a market cap 75% less than its lowest priced competitor. If CIMT were to trade at the same market cap of its lowest priced peer it would still trade at the lowest price to sales multiple in the 3-D sector. Every metric an investor looks at with CIMT says one thing, the stock is still very cheap. For investors looking to make an investment in the 3-D sector, CIMT is the profitable undervalued peer to consider.