Voxeljet (NYSE:VJET), a developer of large format 3D printers, has been one of the victims of the recent negativity surrounding 3D stocks. The company was trashed by Citron in November 2013 and its stock fell by 22% during the last three months and by 27% in the last month alone. However, the company still managed to post a valuation growth of around 9% since its IPO. This is a short update on the prospects and competitive positioning of Voxeljet in light of the recent interview given by Joseph Kowen, VP Marketing and Sales Voxeljet, followed by a revised valuation based on the recent investor anticipation of 3D stocks.
Mr. Kowen recently gave an interview to AZoM in which he highlighted several competitive strengths of Voxeljet. He also shed light on the application of his company's products for different industries like automotive and healthcare.
- Voxeljet's printers use the powder binding technology. Powder binding can be explained simply as a process in which layers of powder are bonded by a liquid agent that is deposited through a print head. Management claims that it has the fastest throughput and lowest material cost compared to other additive manufacturing technologies.
- The company's printers have a large build space and a fast print head speed which enables them to print in a relatively short time period. The VX4000 has a build space of 4000 x 2000 x 1000 mm.
- The mold and core for sand casting are built by the binder itself; this eliminates the need for time consuming conventional tooling. "Voxeljet's layered manufacturing offers unrivalled ability to cast complex geometries with ease, minimizing the number of parts required for the cores in molds for these parts" says Kowen. According to Andreas Buchholz, Head of Research and Development at Seuffer, 3D printing can reduce tooling costs by 97%. This indicates that Voxeljet has promising opportunities in the casting business.
- Because of its focus on casting equipment, Voxeljet has the ability to cast complex geometries that are used in the testing phase of automobile manufacturing and in developing sophisticated medical appliances.
The company held its IPO back in 2013 and is now executing a plan for deploying the funds generated. The funds will be used for:
- Expanding its European service center from 16 to 40 thousand square feet.
- Establishing a new service center in the US.
- The company is also planning to launch its service centers in Asia later this year.
Key Takeaways from the Interview
The adaptation of 3D printing is basically a function of three variables.
- Material properties
- High print speed
- Lower cost
As its printers have a relatively higher speed and lower material costs as mentioned above, Voxeljet has positive future prospects. It cannot be considered to be in the same league as 3D Systems and Stratasys but it has the ability to capitalize on the industrial casting equipment market. Another thing to note about Voxeljet is that it generates almost equal revenues from its services and printer sales divisions. Even if future printer demand remains sluggish due to high manufacturing costs and prices, the services segment will grow because of the benefits it creates for prototyping, casting equipments and on-demand finished parts for testing purposes. The key takeaways from this interview are as follows:
- Voxeljet does have some competitive advantages despite its smaller size/market cap.
- The expansion of current facilities and construction of new ones indicates that the company management is anticipating a growth in demand.
- Voxeljet's service facility in the US can generate substantial revenues due to the advantages of 3D printing over conventional tooling.
The industry P/S ratio is used to derive a price target. P/S is used because earnings do not reflect the current growth of the 3D industry because most of the earnings are consumed in R&D. Even with falling market value, our price target for Voxeljet shows significant potential for growth.
Voxeljet is a competitive 3D printing company with specialty in casting and molds. The expansion of the services business in North America and Asia is expected to create revenue growth because of the savings in cost and time Voxeljet's offerings provide over conventional tooling methods. In our opinion, Voxeljet is a buy despite all the negativity surrounding the 3D printing industry.
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.