3D Printing Stocks: Overvalued or Undervalued? A Look to the Future

With the chaos in the market these last few months when it comes to 3D printing stocks, it’s no wonder investors are a bit squeamish about throwing money at any one of the major players within the space. Stratasys (NASDAQ:SSYS) recently dropped over 30% in one day as they warned that their 2014 guidance for Q4 was too high, and that their 2015 full year guidance came in well shy of what analysts had expected. Just months prior we saw another major dip in one of Stratasys’ competititors, 3D Systems (NASDAQ:DDD) as they too warned that their earnings for 2014 would come in shy of what they themselves had expected. When it comes to the smaller publicly traded companies like voxeljet (NYSE:VJET) and ExOne (NASDAQ:XONE), stocks of both are merely a shadow of where they were at back in 2013-14.

So what does this all mean? Is the 3D printing market a fluke? Should investors stay away? I thought it would be interesting to take a look at where these companies are headed according to the consensus earnings estimates of some of the top analysts on Wall Street, then allow you all to decide if the stocks themselves are worth the risk.

I will start by saying that I’ve had positions in all of these stocks, especially Stratasys and 3D Systems, for years now, and continue to buy on the dips. The information I am providing is simply consensus estimates provided by Etrade.com for each stock.

Stratasys:

Analysts had expected the company to earn $2.91 per share in 2015. The company, however, threw a wrench into these expectations by putting forth a projection of just $2.07-$2.24 per share for the year. With that said, at a $58.00 share price, this would equate to a PE ratio of around 25-27, certainly not bad for a company that expects to see organic revenue growth of 25% per year for the foreseeable future. Now if we assume that this week’s warning by Stratasys will only have an effect on earnings estimates by analysts for the current year, then the PE ratio should continue to plummet in 2016 and 2017 as well. Expectations are for an EPS of $3.75 per share in 2016 and $4.70 per share in 2017. At a share price of $58, this would equate to a PE ratio of approximately 15 and 12, respectively. Of course there is a lot that can happen over the next 2-3 years, but if the company grows like they expect to, and the overall market for 3D printing continues its expansion as well, this stock could be trading much, much higher come 2017 and beyond.

3D Systems

Next we turn to 3D Systems, the other giant within the 3D printing space. The company, led by Avi Reichental, despite its falling share price, has set itself up in numerous verticals within the market. With shares trading at under a third of their all-time high reached back in January 2014, it could be argued that now is a great time to buy. Analysts believe that the company will earn approximately $1.03 per share this year, equating to a PE ratio of around 28.8 based on a share price of around $29. Digging a bit deeper, annual earnings estimates by some of the top Wall Street analysts for 2016 and 2017 come in at $1.34 and $1.45 per share, respectively. This would equate to PE ratios of 21.6 in 2016 at the current share price and 20 in 2017. Just like with Stratasys, a lot can happen by 2017, especially as HP enters the market sometime in 2016.

Voxeljet & The ExOne Company

Next we can turn to two of the smaller players within the industry, voxeljet and The ExOne Company. Neither company is currently profitable, as they try and situate themselves within an expanding industry by investing heavily in R&D. At the same time though, both companies’ top lines are improving and are expected to improve, with analysts expecting voxeljet to turn their first profit sometime in 2017, while ExOne is expected to become profitable by the 4th quarter of 2016. Both companies have market caps under $200 million, and are burning through a good deal of cash. It will be interesting to see how much, if any, additional capital will need to be raised via secondary offerings of each stock. As long as dilution doesn’t hurt current shareholders, those who can withstand the volatility within these two stocks may reap the rewards of profitability come 2017. There is also a decent chance that either or both company may be acquisition targets even prior to reaching profitability.

Right now, as things stand, Stratasys looks to be the cheapest of the four stocks. As long as they can maintain their annual target organic growth rate of 25%, investors should be very happy in the long run. The other three stocks are now affordably priced as well, perhaps presenting a good entry point into the 3D printing space if you are bullish on the industry. Only time will tell what competition will present itself, and just how accurate analysts will be. Let us know your thoughts on any of these four stocks in the 3D Printing Stock forum thread on 3DPB.com