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Proto Labs - Some Thoughts After Recent Excessive Volatility

Apr. 06, 2021 4:52 AM ETProto Labs, Inc. (PRLB)15 Comments


  • Proto Labs is a diversified custom-made manufacturer, helping its clients with a wide range of production technologies.
  • With time to market becoming ever more important, Proto's services are in great demand.
  • Over the past decade, this company has grown to become a nearly half a billion player in the custom-made field.
  • Shares have seen a huge momentum run coming out of Covid-19, followed by an equally huge 60% reversal in recent weeks.
  • While appeal has improved following this big pullback, I am still awaiting some further pullback to initiate a position.
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Proto Labs (NYSE:PRLB) has been a secular growth play which develops custom parts and while it is not necessarily a pure 3D printing play, the company has, at times, been regarded as a 3D play. Truth be told, the 3D segment is just a minority of Proto's operations, although I must say that I like the long-term growth story and potential for the company.

Shares fell ''victim'' of a huge momentum run higher over the past year amidst great momentum in the so-called momentum stocks, yet, after a 60% pullback, appeal is emerging in a rapid fashion.


Proto Labs claims to be the largest and fastest digital manufacturing source for rapid prototyping and on-demand production. Services included in the wide range of solutions include injection molding, sheet metal fabrication, CNC machining and 3D printing, among others.

The company has an annual revenue of nearly half a billion dollars which serves nearly 50,000 project developers. An employee count of roughly 2,500 workers serve these customers from 12 locations. The active customer base largely include the medical and healthcare sector, computer electronics as well as industrial machinery, aerospace and automotive, among others.

On a total revenue base of $459 million, Proto relies largely on its injection molding business which with $217 million in sales was responsible for nearly half of total sales. $155 million in CNC machine sales were responsible for a third of sales. 3D printing was responsible for $61 million of sales in 2019, equal to 13% of total sales as the company has a small $21 million sheet metal business as well.

A Former Take

Truth be said is that my last coverage on Proto was a while ago, as I covered the company back in 2017 when the 3D momentum run lifted shares of Proto Labs as well, as

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Comments (15)

TruffelPig profile picture
Is it time now after the earnings blow-up?
The Value Investor profile picture
@TruffelPig still have to look into the numbers.
bluescorpion0 profile picture
but what makes you think they won't blow up over and over? to me this looks like a subpar business, even if its using all the buzzwords of '3d printing' and 'digital manufacturing'. I can understand mass manufacturing or high value aerospace wanting local printing for perhaps political and inflationary reasons but I can't seem to understand why anyone would care to save money or localize a prototype.
Dang, great call my friend! Currently trading in low $70's.
I feel like the $75 price target you gave is due to the trendline that can be drawn from the lows since the IPO -- more than any single fundamental analysis reason
The Value Investor profile picture
@Mangowlyy Just a desired entry point based on my estimated earnings power and the multiple which I am willing to pay for it!
@The Value Investor Did you end up entering a position on $PRLB since it is now under $75?
The Value Investor profile picture
@beezbo Yes gradually buying the dip here.
User 10700441 profile picture
Protolabs is a growth company. They have an innovative automated way for customers get quotes and design feedback. They are innovative in their handling of tooling and low volume to mid volume parts. They are a source for plastic and metal parts. The parts service side of many many manufacturing businesses can take advantage of protolabs innovative tools.
bluescorpion0 profile picture
@User 10700441 what happens when customers just buy a desktop 3d printer and do it themselves?
@scorpion.north -
Same argument can be made of any service: You can make your own meals, versus eating out. Repair your own car, versus taking it to a mechanic. Build your own PC, versus purchasing a PC.
The paying customer is one who appreciates convenience, product quality (which is borne of trial-and-error experience), and just-in-time supplies ordering. Fortunately, there are plenty of people who are willing to pay for such services, rather than fuss with the DIY route.
The Value Investor profile picture
@scorpion.north Good point. I guess mostly the larger clients would do this (first) as it all depends on efficiency of 3D solutions over time.
The $200 was due to FOMO in the tech sector, and a number of companies hit (insane and unsustainable, IMO) new stock price highs. Money appears to have rotated out of the tech sector in the past half year, and thus those stock prices are at more reasonable, and perhaps sustainable, levels.
Who can really say where we go from here? Government stimulus checks and subsidized low interest rates will continue to support the market, until they don't.
bluescorpion0 profile picture
in the conglomerate failures of old days paying with overpriced stock was a chain letter ponzi scheme type affair that destroyed massive value and eventually bankrupted many companies , or to be sold to rivals for pennies on the dollar. why would 3d hub shareholders accept protolab shares if it wasn't to sell them and knowing they could get more value than they sold? remember: the seller almost always has the upper hand , especially in a broken market where price signals have been destroyed by the government
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