3D Printing: Profiting From The Revolution

| About: Proto Labs (PRLB)

It has been no secret to investors that the next "big thing" is 3D printing. Additive manufacturing or 3D printing faces a high growth outlook due to its outstanding advantages to industrial firms. Normal printing consists of merely printing on paper and is important for documents. Additive manufacturing, however, can create parts for cars, planes, consumer goods, food and everything else that you can imagine. The industry has also shown some amazing steps in the medical field where these printers have been able to make bones and, further down the road, kidneys and hearts. The point is that these amazing tools can help solve a lot of problems in our lives with costs projected to only decrease with time.

While there are several companies in the 3D printing industry, Proto Labs, Inc. (NYSE: PRLB) is a name that stands out. Proto Labs has steadily seen earnings grow over the past few years with the expectation of the growth continuing, exponentially. The company recently released fourth-quarter earnings and the results were very strong. Proto Labs reported earnings per share of $0.31 on revenue of $33.6 million. Wall Street was looking for earnings per share of $0.26 on revenue of $32.7 million. Revenue jumped 31 percent from last year's fourth-quarter results and gross margin rose from 56.8 percent to 62.5 percent. As you can see, these are very impressive numbers for an emerging name in an emerging industry.

Turning to the fundamentals, Proto Labs has a market cap of $1.13 billion and currently holds a buy rating from analysts. The company has a price to earnings of 47.44 and a forward price to earnings of 28.35. PEG comes in at 1.58 and price to sales at a steep 9. Price to book is not much better at 7.22. Proto Labs has no debt and $2.54 cash per share. This gives Proto Labs very safe financial security, as seen in the current ratio of 7.81. Earnings per share are expected to rise 145.43 percent this year, 26 percent next year and 30 percent over the next five years. The management efficiency ratios are outstanding with a ROA of 20 percent, ROE of 35 percent and ROI of 22 percent. Margins are wide and very impressive as well.

Before you buy this name, there are some risks to consider. While there are certainly a lot of reasons to buy the stock, it is expensive. Over the past year, the stock is up over 65 percent and we need to see a pullback before getting into this name and any other 3D printing stock. Other than that, the stock has great fundamentals in an emerging industry that is busting at the seams with growth. To be sure, this is an emerging industry and sometimes setbacks do occur and it is important to keep an eye out for any potential dangers. Additionally, with the U.S. economy set to slowdown, 3D printing could take a backseat for a little bit as companies focus on their cash reserves. Once we get a pullback, this is a great long-term holding.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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