Alphaform AG - German Engineering And Exceptional Value In A 3D Printing Stock

| About: Alphaform AG (AFRMF)
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Editors' Note: This article covers a stock trading with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

"Exceptional value" and "3D printing stock" are words investors have probably never seen in the same sentence ... until now.

With the 3D printing industry projected to have a CAGR (Compound Annual Growth Rate) between 25-30% for the foreseeable future, well-known 3D printer manufacturers such as 3D Systems Corp. (NYSE:DDD), Stratasys Ltd. (NASDAQ:SSYS), The ExOne Company (NASDAQ:XONE) and Voxeljet AG (NYSE:VJET), reached extraordinarily high valuations in 2013. Many expressed their belief that valuations in the well-known players had gone beyond their underlying fundamentals required to support their share prices. The first month of 2014 has seen shares of the well-known names in steady decline and it's anyone's guess how much farther their collective slide will go.

Investors in 3D printing stocks may be surprised to learn that there is an unknown, pure play, "deep value" stock in the 3D printing industry, Alphaform AG.


Headquartered outside of Munich, Germany, Alphaform AG (OTCPK:AFRMF) (ATF:Xetra) is a leading European contract manufacturer of complex and sophisticated components using 3D printing, see Alphaform Services Brochure.

A 1996 spin-off from the German OEM, EOS, Alphaform is a smaller company with about 235 full-time employees, 5.3 million shares outstanding, a 3 million share float and a market cap of just $17 million (USD). The company's current share price offers great value when compared to U.S. listed companies that operate in the additive manufacturing space as either an OEM or a 3D printing service provider.

I'll chart some comparative financial metrics later in the article. For now, I will say that the current Alphaform AG valuation of $17 million (USD) is remarkably inconsistent with the company's $26.4 million of revenue reported for the first 9 months of 2013. Alphaform is expecting full-year 2013 revenue to come in around $35 million (USD). Moreover, London's Close Brothers Group has estimated 2014 earnings of €.18/share (.24/share USD) for Alphaform, giving the stock a forward PE multiple under 20.

Operating Segments

Alphaform AG operates in two segments: 3D printing/additive manufacturing and bio-medical precision casting. The company recently announced a strategic move for 2014 to further develop its more profitable 3D printing segment through online order processing, new sales channels and additional engineering support for design services. The translation from German to English comes across as sounding a little dire, but the company is expecting to meet its previously-stated 2013 revenue target of 26 million euros ($35.1 million US).

Investors should note that Alphaform has a market cap approximately $18 million U.S. below its 2013 revenue of $35.1 million U.S. This is 2.5X what Voxeljet AG has reported for the trailing twelve months. Voxeljet is currently valued at $324 million U.S., while Alphaform is valued at under $20 million US.

I'd say that's "Exceptional Value" in a 3D printing stock.

3D Printing Services Market

By 2017, Wohlers Associates believes that the sale of 3D printing products and services will approach $6 billion worldwide. Drilling down to just the 3D printing services sector of the market, The Fredonia Group predicts that 3D printing manufacturing and rapid prototyping services "will continue to account for the majority of demand" in the 3D printing industry through 2017. This is due to "just-in-time" manufacturing, which negates the need of large inventories and storage of those inventories. It creates a more efficient supply chain with lower costs, making products more affordable and helping businesses gain a competitive advantage in offering lower prices to their consumers.

Strong growth in the 3D printing services segment was reported by 3D Systems, whose Quickparts services segment reported 38% sales growth in Q3 2013, and Stratasys, who reported 37% sales growth in Q3 of last year from its RedEye 3D printing services. Likewise, Alphaform AG reported its "second strongest quarter in years" in Q3 2013.

Germany Leading Eurozone Recovery, Analyst Estimate of .24 EPS in 2014

Like many companies in Europe, Alphaform had a rough first half of 2013 due to the Eurozone recession which ended in August. As a result, revenue was off 6.2% for the first 9 months of 2013 compared to the same period in 2012.

In my experience, some of the best investment opportunities can be found where companies are beginning to show improved sales following a completed economic downturn, and this appears to be the case with Alphaform AG. Note statements from the first paragraph of its Q3 report: "As a consequence of a stable economic situation again, we have noticed since July a permanent order increase in the 3D printing and additive manufacturing sector" and, "the sector is clearly profitable again".

Furthermore, January data shows the Eurozone economy expanded at its fastest pace in two-and-a-half years in January, with Germany leading the recovery- see: "Eurozone Recovery Gathers Steam On Strong Activity In Germany".

As mentioned above, London's Close Brothers Group estimates Alphaform AG 2014 earnings of €.18/share (.24/share USD), giving Alphaform AG an incredibly low forward PE multiple under 20.

Trading Just Above Book Value While Generating 2.5X the Revenue of voxeljet

Alphaform Total Assets (20.3 million euros) - Total Liabilities (8.7 million euros) = Shareholders' equity (book value) of 11.6 million euros.

11.6 million euros/5.3 million shares = 2.19 euros in book value/share (see Q3 Report, page 11).

The metrics below reveal how undervalued Alphaform AG is by comparison*








Alphaform AG



3D Systems


Market Cap:

17.2 million

395.5 million

571 million

6.5 billion

5.4 billion

Revenue (TTM):

34.7 million

13.0 million

41.5 million

460 million

401 million

Price/Sales :






Net Income :


















*As of the close 2/5/2014

New Products/Services

A major factor in revenue expansion and earnings growth is the introduction of new products and services. As mentioned above, Alphaform will be adding an online ordering system and expanding its engineering design services this year.

Alphaform AG- Artshapes logo

Another new service is its launch of Artshapes. The translated October launch press release reads:

Artshapes will be a web shop where people can acquire three-dimensional objects by renowned artists and designers. The special feature of the shop is that the objects offered here do not yet exist, but are only made to order with additive technologies - this can be selected size and material according to the specifications of the artist or designer by the buyer. Artshapes will initially operate in the German-speaking countries, will be added later by other European countries", and "Our processing goes far beyond what is commonly known as 3-D printing, thereby enabling the production of high-quality objects of well-known artists and designers.

I believe this high-end "objets d'art" focus will carry higher gross margins with less cost and site maintenance than a business model like Shapeways, for example, and expansion to other European countries with different languages could be easily and economically accomplished.


Alphaform's sales channel expansion, additional engineering support for design services and launch of Artshapes are reasons to expect strong forward growth. When these factors are combined with the fact that Germany is leading Eurozone growth at the fastest rate in 2 ½ years, I believe the Close Brothers' earnings estimate of .24/share USD can be attained.

Alphaform AG has the lowest price-to-sales, the lowest price-to-book and the lowest forward PE ratio of any pure play stock in 3D printing.

These are facts, not opinions.

My opinion is that Alphaform will outperform better-known peers over the next 3-6 months as more investors discover they can have high forward growth and exceptional value in a 3D printing stock.

Conversion rate of 1 EUR = 1.36 USD used in all instances.

Alphaform AG has been trading on the Xetra German Exchange under the stock symbol (ATF) and was not trading on a U.S. exchange under the ticker (OTCPK:AFRMF) until late Friday, Feb. 7th. This new venue will give American investors a chance to participate in an exciting 3D printer growth story that's certainly not valued to perfection like so many others.

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.

Additional disclosure: I am long Alphaform AG via ATF:DE, as the stock wasn't trading on a U.S. exchange under the stock symbol AFRMF until three hours before the market close on Friday, Feb. 7th.