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"Risk comes from not knowing what you're doing" Warren Buffett I look and sift the world for such misplaced bets. When I occasionally find one, I first exploit it for profit. Then, I write about it for anyone else interested in such ideas. Twitter: @unemon1 Scribd:... More
  • A Text-Book Example Of Irrational Exuberance In The 3D-Printing Space 1 comment
    Apr 18, 2013 9:07 PM | about stocks: DDD

    I decided to post a quick sensitivity analysis for 3D Systems Corp

    (Nyse: DDD).

    Assumptions:

    1. Yearly Dilution of the Shareholders Base: 5% (below the 10y average)

    2. Long Term Net Income Margins: 20%

    3. Number of Periods Projected: 10

    The Discount Factor has been computed with the help of the CAPM model. The Market is implying/Demanding a 13.84% yearly Return on DDD. Equity Risk Premium for S&P is currently estimated at 5.78%.

    Here is the Current Fair Value Per Share depending on different

    By paying above $32 for each DDD share, investor are assuming a terminal PE ratio of 11 or above together with a Year over Year revenue change of more than 30%. Sustaining a yearly revenue growth rate of over 30% for 10 years is not very common.

    The orange area contains the Fair value results for what I believe to be the feasible set of Terminal PE and Revenue Growth outcomes over the next 10 years.

    The fair value per share ranges from as high as $21.49 to as low as $6.97. The average is $12.91.

    Even under a very optimistic assumption such as a YoY Revenue growth rate of 30% and a Terminal PE of 15, DDD is currently overvalued by 48%. $21.49 is actually 32.80% lower than the current Price.

    In my Opinion, DDD has still room to fall by about 30-50% at least.

    People paying $32 per share are expecting DDD to be the next APPLE (2003-2012).

    APPLE revenue increased by an average of 40-43% per year over that 9-years period.

    Apple Current PE is at about 10.

    If DDD's revenue were to growth by 40% per year and the Terminal PE wood to be 10, the present fair value of each DDD share is $27.92 (12.75% below current Market Prices).

    Do you really think that DDD can do better than AAPL?

    I don't!

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: DDD
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  • marcomark
    , contributor
    Comments (2) | Send Message
     
    I agree. check out http://bit.ly/q8jCf0 feb2013 issue
    21 Jul 2013, 09:44 PM Reply Like
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