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3D Systems: Why My Price Target Is Now $5.60 A Share

George Kesarios profile picture
George Kesarios


  • This is an unforgiving market for stocks that do not exhibit top-line growth.
  • Unfortunately for 3D Systems, growth is not there, and there is evidence that revenue might be lower in the next several quarters.
  • This could mean the market marks down its stock to 1X revenue or less, or close to $5.60 a share.

3D Systems (NYSE:DDD) shocked the market on Tuesday reporting a loss of $37.7M and a respective loss of $0.20 EPS for Q3'17. The EPS result was a huge miss by $0.32, and frankly it does not get worse than this.

The company also missed on revenue by about $10M. While on the face of it, $10M is not a lot, it is as a percentage of revenue, when DDD only did $152.9M in revenue.

That not being bad enough, the company withdrew its guidance, citing it has "significant transformational work in solving legacy issues", while at the same time addressing executional issues.

Long-time readers know I always caution on paying too much for growth. Yes, growth is what has driven this market, but not at any cost. And in the case of the entire 3D space, investors unfortunately paid pie-in-the-sky valuations over the years.

ChartDDD PS Ratio (TTM) data by YCharts

Long-time readers also know I place a lot of emphasis on the Price/Sales ratio as a guide for not paying too much. While it's not the only ratio I look at, any stock above 5 (with a few expectations) is a suspect for losses or underperformance.

And as the chart above shows, investors have paid "through the nose" for DDD's growth only to find themselves losing massive amounts of money over the years.

And the only way to protect yourself from stocks like DDD is to refrain from buying them, or at least know what you are buying and be ready to sell at a moment's notice.

Because when a company has no growth in this market, or when a company is reorganizing, then the market really knocks down valuations. In the case of DDD, I think you will be surprised at how low this stock might go in the future.

This article was written by

George Kesarios profile picture
I only look at stocks that have the possibility to double over a twelve month period and stocks in which the risk/reward ratio payout is high. In addition I focus on swing trade opportunities. I focus more on valuations and risk/reward metrics as opposed to what make companies tick. I have been a professional investor for over 20 years and during the past several years an economics analyst and financial writer for capital.gr, the biggest economic news portal in Greece. I have managed money from time to time and have also done some seed venture capital projects in the past.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a short position in DDD over 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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