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Summary

  • HURC is a 46-year old company that is very profitable and has a strong balance sheet.
  • HURC announced filing of a U.S. patent application for an adaptor which turns CNC machines into 3-D printers, creating potentially disruptive technology.
  • When HURC is compared to 3D Printing stocks there is a big valuation gap.

Hurco Companies (NASDAQ:HURC) was founded 46 years ago. HURC is an industrial technology company, designs, manufactures, and sells computerized machine tools for the companies in metal cutting industry worldwide.

HURC is profitable with $.90 earnings per share in the first six months of this fiscal year. The average estimate for this year is $1.74 earnings per share. HURC has beat estimates for the first two quarters this year. The balance sheet is strong with $47 million in cash and $3.2 million in debt. HURC has a current market capitalization of approximately $200 million. There are approximately 6.5 million shares outstanding of which 75% is held by institutional funds and insiders, leaving a tradeable float of approximately 1.6 million shares.

As you can see this is not a fly by night company trying to enter a hot industry. This is an established, profitable company that may have just introduced disruptive technology to the 3-D printing industry.

On July 15, 2014, HURC announced a filing of a U.S. patent application for an adaptor which turns CNC machines into 3-D printers.

"We designed an additive manufacturing adapter that, in combination with proprietary Hurco control software, effectively turns a CNC milling machine into a 3-D printer," said Gregory Volovic, President of Hurco Companies, Inc. "Hurco has a long history of inventing technology that allows our customers to be more productive and profitable. This is yet another Hurco innovation making advanced technology accessible to a broad range of customers. With this new additive manufacturing capability, users may go from print to plastic prototype to finished metal part on one machine without repeated set-ups and without multiple prototyping utilizing costly metals and raw material," explained Volovic.

This additive manufacturing technology permits Hurco machine tools to achieve 3-D printing directly on the machine tool without the need for a separate 3-D printer. Hurco is working on expanding its invention to include other additive manufacturing processes.

"We recently filed a utility patent application with the U.S. Patent and Trademark Office describing and claiming a variety of novel features of our 3-D printing technology. Our control technology will provide our customers speed and ease of use in performing CNC-based, 3-D printing and prototyping. With our new next generation control technology debuting at the International Machine Tool Show in Chicago later this year, Hurco is very excited to be introducing not only a new look for our products and our new CNC machine control, but also innovative capabilities not found on other CNC machines," said Volovic.

Several leading industry publications were quick to comment of the significance of the new HURC 3-D printing product.

Michael Molitch-Hou of 3-Dprintingindustry.com stated, " Many Makers in the 3-D printing community have been working on their own, small-scale hybrid machines, capable of CNC milling or laser cutting with the simple change of a tool head. And companies like iRobot have been researching the ability to create all-in-one manufacturing stations. This, however, is the first industrial manufacturer who has announced the actual production of hybrid 3-D printing-CNC machining. No desktop or workbench devices, Hurco's equipment could pave the way for a future where both 3-D printers and CNC mills are a thing of the past. This hybrid device is just a few robot arms and soldering guns away from an all-purpose manufacturing machine.

BRIAN KRASSENSTEIN of 3-Dprint.com explained, "With tens of thousands, if not more, CNC machines owned by manufacturers worldwide, it is a shame that any of them would have to invest additional capital on high tech 3-D printers. These 3-D printers use mostly of the same parts as a typical CNC machine, and work in much the same way. Hurco understands this and has taken the initiative to invent an adaptor which they have just filed a patent application for. The adapter basically turns CNC milling machines into fully functioning 3-D printers.

Such a breakthrough could save manufacturers millions of dollars, as their current equipment can be re-purposed or co-purposed to include that of 3-D printing. Companies which had considered purchasing 3-D printing equipment in the past, but decided against it due to costs, may now be able to affordably add 3-D printing to their manufacturing capabilities."

Gary Anderson of 3-Dprintingstocks.com commented, "In news yesterday, Hurco Companies based in Indianapolis, Indiana announced they filed a U.S. patent for what may be disruptive technology which combines 3-D printing and CNC machining. The technology permits Hurco to achieve 3-D printing directly on the CNC machine without the need for a separate 3-D printer. Hurco is also working on expanding its invention to include other additive manufacturing processes."

Risks

As with any new product there is always execution risk. However, this may be mitigated by the reputation and existing customer base from 46 years of experience. Lastly, HURC only has a tradeable float of approximately 1.6 million shares. Low float stocks can be subject to extreme and rapid moves.

Valuation

While it is not known what the revenue potential is for this new product, judging by industry comments above it sounds like it has potential to increase sales and earnings for an already profitable company.

When we look at other 3-D printing stocks:

3D Systems (NYSE:DDD) has a Price/Sales ratio of 10.4 and a 69 P/E ratio on current year forecasted earnings.

Stratysys (NASDAQ:SSYS) has a Price/Sales ratio of 9.4 and a 47 P/E ratio on current year forecasted earnings.

The ExOne Company (NASDAQ:XONE) has a Price/Sales ratio of 12.4 and a 282 P/E ratio on next year forecasted earnings.

HURC has a Price/Sales ratio of only .98 and a 17.6 P/E ratio on current year forecasted earnings of the legacy CNC business and this does not account for future 3-D product sales.

If I take the average Price/Sales ratio for DDD, SSYS, and XONE I get 11. If I take the average P/E ration for DDD and SSYS I get 58.

If HURC had a 11 Price/Sales ratio on the $200 million trailing twelve months sales, that would be a stock price of $338.46.

If HURC had a 58 P/E ratio on the $1.74 forecasted legacy EPS, that would be a stock price of $100.92.

Again, this comparison does not account anything for potential 3-D sales from what industry publications are calling a potentially disruptive product.

HURC is definitely a stock to watch after the recent announcement of the 3-D printing product and potential future announcements as Hurco is also working hard on trying to expand this invention to include numerous other additive manufacturing processes.

Disclaimer: This article is not investment advice or making stock price predictions for any stock. Do not make investment decisions based on this article as I am not an investment advisor. This article is for information only. I am long HURC and I may sell my position in HURC at any time.

I released this article at 9:15 am EST Thursday 17, 2014 on my blog atsuper-trades.com and to my subscription newsletter service on profit.ly at 9:15 am EST Thursday 17, 2014.

Source: How Hurco Companies Could Be A Triple-Digit Stock With Its New 3-D Printing Product