3D Systems Prints Everything But Money

3D Systems Prints Everything But Money

SPENCER JAKAB

Updated Feb. 27, 2014 4:33 p.m. ET

It is appropriate that a movie starring molded blocks of polymer, “The Lego Movie,” is tearing up the box office. Three-dimensional printing, a technology that can turn plastic and other materials into almost anything, has been a runaway hit on Wall Street recently.

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That enthusiasm cooled slightly earlier this month when market leader 3D Systems Corp.DDD -1.72% issued a profit warning ahead of its fourth-quarter earnings release set for Friday. Per-share earnings are seen at 43 cents to 45 cents, down from 47 cents a year earlier. After soaring by nearly 900% over the last two calendar years, though, there still is plenty of froth to come off its share price.

True, the company didn’t cut its revenue-growth forecast for the quarter or the current year. On the other hand, it has been making acquisitions at a pace of about one a month since 2012, helping to bolster that top line—and its share count.

Some investors hold out hope that one day soon 3D Systems itself will get gobbled up at a chunky premium by the likes of Hewlett-PackardCo. HPQ -0.50% , which has expressed interest in the industry. Don’t hold your breath.

In its investor presentation, 3D Systems cites a third-party forecast that its industry could grow by a blistering compound annual rate of 19% through the end of this decade. That would leave the global market at $10.8 billion.

Three publicly listed 3-D printing companies alone have a combined market value of $14.6 billion today, though—slightly over half of that coming from 3D Systems. To put this into perspective, that exceeds the value of Xerox Corp. XRX +2.33% which, not so long ago, revolutionized the business of do-it-yourself 2-D printing.

Investors these days are forgiving of statistics like 3D Systems’ 2013 earnings multiple of 156 times. But it is arguably a lot less dominant than Xerox was back in the early 1960s or even Tesla Motors Inc. TSLA -0.18% is in the field of electric cars today.

One can be skeptical about 3D Systems without being a Luddite. The technology clearly holds tremendous promise, but its recent arrival at a price point that some consumers can afford has created unreasonable expectations.

Yes, 3-D printing may one day churn out anything from automobiles to artificial limbs. That doesn’t mean the business is a license to print money today.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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