The start of the year was extremely harsh to the companies operating in the 3-D printing sector, as the stocks took a hard fall. Voxeljet (NYSE:VJET) also fell drastically, and despite a recent rise, the stock remains down about 48% year-to-date. The downward trend that started with a weakness in the sector was compounded by the dilution caused by the company's decision to raise $70 million.
However, these stocks have made a solid recovery, and most of the companies operating in the sector have regained substantial value. Voxeljet has a unique advantage when it comes to industrial 3-D printing, due to its build size. We believe this advantage will be vital for the success of the company going forward.
There are two major players in the industrial 3-D printing besides Voxeljet: 3D Systems (NYSE:DDD) and Stratasys (NASDAQ:SSYS). In fact, they never claim to manufacture "industrial" 3-D printers, and rather go with the word "professional" 3-D printers. The difference between these two words mainly comes from the build size and speed --Voxeljet has an advantage in these two areas compared with the two companies mentioned above. Let's compare a printer from each company which offers the biggest build size and see who comes on top. 3D Systems' ProJet 5000 has the biggest build size of any other 3-D printer in its portfolio, while Stratasys' Fortus 900mc offers the maximum build size in its product line. Let us compare these two with Voxeljet's VX4000. The following table shows the build sizes of each of these printers.
4000 x 2000 x 1000 mm
914 x 610 x 914 mm
550 x 393 x 300mm
According to the table above, Voxeljet clearly beats its competitors in terms of build size, while Stratasys stands at the second spot, ahead of 3D Systems. Stratasys' printer comes somewhat close to Voxeljet in only one dimension. The build size is important in the industrial segment of the 3-D printing industry, and it will certainly give Voxeljet an advantage.
However, this does not mean that 3D Systems and Stratasys are falling behind in the 3-D printing industry. 3D Systems has a focus on the consumer segment of 3-D printers, and it is performing well in that area. On the other hand, Stratasys was only focused on industrial printing, but after the acquisition of MakerBot, it is directly competing with 3D Systems in the consumer segment as well.
The 3-D printing industry has grown dramatically over the past few years. In the last two years, the applications of 3-D printing have become clear and the technology is now becoming mainstream. However, the robust growth seen by the sector is expected to continue in the short-medium term - according to Gartner and Wohlers associates, the industry might grow about 50% this year. However, growth will mainly come from the mid-range printers that cost less than $100,000. Furthermore, in this growth, a large portion will be comprised of printers costing less than $5,000, i.e. consumer printers.
Voxeljet also has smaller and more affordable products, such as VX200, which directly competes with 3D Systems' products in binder jetting. Voxeljet still has a lot to gain as bigger build size printers are accepted by the industry. 3D Systems has also come up with a bigger build size concept, which gives a hint that the industry for such printers has hit its initial phases.
A Glance at the Fundamentals
In the first quarter of 2014, Voxeljet increased its revenues by 14.7%. Its gross margin also improved significantly by 120 basis points year-over-year. However, like most of the companies operating in the high-growth segment, Voxeljet has a premium attached to its valuation. The stock is trading at price-to-book and price-to-sales ratios of 5.1 and 15.4, compared to the industry averages of 2.6 and 0.7, respectively. The company clearly needs to enhance its sales and profit margins in order to bring these multiples in line with the industry averages. On the other hand, 3D Systems and Stratasys are also trading at a considerable premium based on these multiples. 3D Systems has price-to-book and price-to-sales ratios of 6.2 and 10.3 - Stratasys' ratios are better than those of both these companies - It has a price-to-book ratio of 2 and a price-to-sales ratio of 8.8.
Despite the growth shown by the 3-D printing industry over the last three years, we still believe that the industry is at its early stages and the development of the industry will push the growth of these companies further. We are seeing more acceptance of 3-D printing from the manufacturing segment, which will be hugely important for Voxeljet, as the company has its products catering to this certain segment. We believe the fall in the stock price at the start of the year has made Voxeljet an attractive prospect for investors.
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Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.