Don't Ignore 3D Systems' Long-Term Potential

Jul.16.14 | About: 3D Systems (DDD)


3D Systems is well-positioned to benefit from the healthcare segment.

3D Systems' innovations and acquisitions will drive long-term growth.

The 37% YTD drop in 3D Systems' valuation represents a great buying opportunity.

Although 3D Systems (NYSE:DDD) has taken a massive hammering this year, with shares down 37%, the company is still reporting solid revenue growth. In fact, in the first quarter, 3D Systems reported revenue of $147.8 million, up 45% from the prior-year period, and beat the consensus estimate of $145.5 million.

Revenue from 3D printers and other products grew 53% to $60.8 million, and comprised 41% of total revenue, while 3D printers alone contributed $50.7 million. The company is investing rapidly in the business as 3D printing finds more applications. For instance, 3D Systems has made significant progress in the development of the 3D printer platform and materials to support Google's (NASDAQ:GOOG) (NASDAQ:GOOGL) Project Ara.

A growing market

3D printer growth is exceeding all other product categories. There was a unit growth of 54% in printer shipments, including a 76% increase in design and manufacturing printers and a 48% growth in consumer units. 3D Systems is also expanding its regional service, support and logistics operations by setting up local spare parts warehouses in Europe and Japan, which should allow it to tap 3D printing growth in these markets.

Healthcare is one of the fastest-growing segments of the company, and it is expanding its applications and reach in this segment. 3D Systems acquired Medical Modeling, a leading provider of 3D printing-enabled patient-specific medical devices and personalized surgical treatments, which include proprietary, virtual, surgical planning and clinical transfer tools.

Medical Modeling is focused in the field of 3D printing, delivering personalized surgery and world-class expertise that delivers thousands of surgical planning tools, implant and facial prosthetic devices, annually. The healthcare platform now delivers integrated 3D modeling to printing capability available in both direct metals and by the compatible plastics. This has created the largest 3D printing personalized surgery and patient-specific medical devices, service and product capability available on the market, which helps surgeons with high precision and control in previously inoperable cases.

The acquisition of Robtec, a leading 3D printing and scanning product distributor in Latin America, will create a Latin American sales and service platform for 3D Systems. This will help the company cover locations in Brazil, Argentina, Chile, Uruguay and Mexico via its channel activities.

Innovations and acquisitions to drive growth

The company also expects accelerated growth in the consumer category, as it has begun shipping the latest Cube 3, CubePro and iSense scanners, and plans to ship ChefJet, CeraJet and CubeJet 3D printers later this year. 3D Systems' acquisition of Sugar Labs last year is finally going to come into play, as the company recently unveiled two sugar 3D printers called ChefJet and ChefJet Pro. These printers are expected to start shipping in the coming months, and should strengthen 3D Systems' position in the 3D printed food market.

While it was obvious, investors were aware of the decrease in profitability, as its earnings declined 28% from last year in the previous quarter. This decreased profitability is a direct outcome of the company's growth strategy of losing short-term profits so as to spend on activities that result in long-term growth and more market share, hence making it a good option for investors.

The company has been constantly criticized for overspending on acquisitions. However, it is slowly starting to integrate them into its core business. Its acquisitions should start reaping benefits once 3D Systems successfully integrates them into its core business, and provide a much-needed boost to the company's bottom line.

In addition, 3D Systems also announced that it is producing a 3D printer for Google's Project Ara, which is 50 times faster than the 3D printers which are available on the market. The speed factor is currently holding back the widespread use of 3D printing, and if 3D Systems is able to deliver, it is going to receive a massive boost. The company said:

"The paradigm shifting, continuous, high speed, fab-grade printer will make true automated, low touch additive manufacturing a reality. To ramp up the speed for production level volume, we have broken away from the methods of contemporary 3D printers."

The company also explained the working process of this new 3D printing platform; the management said:

"Whereas 3D printers typically utilize a moving printhead on a stationary bed, the high-speed, continuous fab-grade printer puts the print bed in motion on speedy track system under a set of stationary printheads. The result is a 3D printing assembly line: many products printing at once, all unique, all in full color and multi materials. Parts in varying phases of completion move in a continuous flow. When a part is done, it exits the track for post-processing and a new print bed takes its place."


Clearly, 3D Systems is making a number of positive moves in the 3D printing industry. Although the company's earnings were down in the last quarter, there's no doubt that it is trying to make the most of the 3D printing market by expanding its product portfolio, by acquiring more companies and investing in research and development. As a result, 3D Systems looks like a good long-term buy.

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.