- MWT and Machin-A-Motion acquisitions have enhanced the portfolio of the company.
- The recent sell-off has brought the stock close to its fair value.
- Sales pushed into the next fiscal year will allow the company to report better than expected results in the first quarter of fiscal 2014.
ExOne (NASDAQ:XONE) is one of the bigger players in the 3D printing industry. The stock of the company has lost substantial value since the start of the year - the stock is down about 34% year-to-date. However, during the last year, the stock gained about 128%. The 3D printing segment is down since the start of the year and most of the players have lost substantial value - 3D Systems (NYSE:DDD) and Stratasys (NASDAQ:SSYS), two of the biggest players in the segment, are down about 35% and 17%, respectively. All of these stocks gave stellar returns during the last year, however, these stocks were unable to hold the gains and the new year has brought their valuations down. However, the company specific reason for ExOne was the decrease in the revenue guidance for the year.
A Step Further in Sand Printing
ExOne's focus strategy has always been to be a leading player in the industrial segment of the 3D printing industry, unlike 3D Systems, which also focuses on the consumer market. Recently, ExOne has taken another step in the 3-D Sand printing market. The company has acquired MWT, a pioneer in industrial grade microwaves, thereby, making a vertical integration in the overall 3D sand printing process.
The acquisition will strengthen the overall operations of the company and ExOne will be able to provide a more complete set of tools to its customers. ExOne only used to provide 3D sand printers to the molding industry. Once the molding was done, the microwaves were needed to add strength and reliability to the finished products. Some 3D printed sand molds, which are printed using binders, are required to be dried in order to achieve their true potential strength.
Having microwaves in their hands, the company can now enjoy additional profits in the overall supply chain. This is because consumers buying 3D sand printers are most likely to buy the industrial microwave as well. The acquisition was worth $4.8 million and is likely to pay off handsomely in the future. Furthermore, the move has positioned ExOne very nicely in the industry and its offering has been enhanced.
Further Expanding the ExCast Strategy
The company made another move, which further strengthens its ExCast strategy. ExOne has acquired key assets in Machin-A-Mation, a leading provider of complex parts for industrial 3D printer consumers. The acquisition was worth $5 million and the company is focused on providing each element of the 3D printing process - from design to finish of the complex parts. ExOne's strength is that the company keeps close relations with its customers. Since the company also provides printing solutions to its customers. This acquisition is an important step for ExOne, and it will further enhance its operations. ExOne has established its PSCs (Product Service Centers), which help it cater its customers better and establish a long-term relationship. This acquisition will further enhance the offerings of the company's PSC in Troy, Michigan.
A Misconception: Lower Earnings Guidance
In January, ExOne announced that sales for the year were expected to be lower than the previous estimates. Previously, the revenues were expected to be around $48 million, which were then brought down to the range of $40 to $42 million. Naturally, the stock of the company took a hit and it is still down for the year. The reason for the revision of the estimates was the delay in approval for sales in certain areas. As a result, these sales have been pushed into fiscal year 2014. This revenue is still under the company's backlog and will be recorded in the first quarter of 2014 along with the regular sales of the quarter. As a result, we will likely see higher revenues in the first quarter of the year.
ExOne is solely focused on the industrial segment of the 3D printing industry. The industrial segment of the industry is expected to see considerable growth over the next few years as manufacturers use 3D printing more in their operations. ExOne's strategy of moving closer to its customers and giving personalized services through PSCs have positioned it very well in the segment. Furthermore, these two acquisitions have further enhanced the product offerings of the company, which will be an added advantage. I believe ExOne is set for the long-term sustained growth and the fall in the stock price allows current shareholders to add to their positions.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. IAEResearch is not a registered investment advisor or broker/dealer. This article was written by an analyst at IAEResearch and represents his/her personal opinion about the companies mentioned in the article. The article is for informational purposes only and it should not be taken as an investment advice. Investors are encouraged to conduct their own due diligence before making an investment decision. I am not receiving any compensation (other than from Seeking Alpha) for this article, and have no relationship with the companies mentioned in the article.