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Proto Labs (PRLB) RSS Feed

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01/28/13
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Great Story on EmergingGrowth.com... Next Tech, http://emerginggrowth.com/investing_today/invest-in-the-next-revolutionary-technology/01/28/2013 One of the highlights of the 2013 Consumer Electronics Show (CES) was an array of 3-D printing systems. While the concept is not new, dating to the 1980s, it has become increasingly powerful in recent years. Some now feel that it has the ability to fundamentally redefine many aspects of the global economy, changing the way people obtain many of the basic (and not-so-basic) household and personal goods that they need. So what is it exactly? Put simply, a 3-D printer (the term comes courtesy of two MIT graduate students who in 1995 modified an inkjet printer to create a crude prototype) is capable of rendering virtually any object from a set of digital schematics. At first this might seem like the same work machine shops have been churning out for decades, but there is a fundamental and very important difference: existing machining processes create an object by removing material, such as turning a steel bar to create a piston rod. In contrast, 3-D printing adds material layer by layer to build—in effect sculpt—the finished product. Think about that for a moment, and it becomes clear that 3-D printing is far more powerful than machining in many respects. Machining cannot produce interior spaces; 3-D printing can do so easily. Something as simple as a hollow sphere would be child’s play for a 3-D printer but impossible to machine using traditional methods, to say nothing of something as complex as, for example, a model of the human skull. Several specific technologies exist, with the main differences lying in what method they use in the “printing” process. Various forms of plastics are most commonly used, but certain technologies—direct metal laser sintering foremost among them—can be used with metals. This technology has already proved a boon to design and prototyping, and at sufficiently low price points—which are coming—a 3-D printer in the home could easily be reality. Imagine ending the need to buy so many basic products, instead manufacturing what’s needed from a supply of stock material. So where are the investment opportunities? Three major public companies in the 3-D printing space—3D Systems (NYSE: DDD), Proto Labs (NYSE: PRLB), and Stratasys (NASDAQ: SSYS)—already have market caps north of $1 billion thanks to rising share prices and stratospheric P/E ratios. (3D Systems is trading at a P/E of 100.37, Proto Labs at 51.50, and Stratasys at 101.90.) Despite the promise of the technology, current pricing is certainly not inviting. Fortunately for those who favor emerging companies, an IPO is coming. Pennsylvania-based ExOne (projected NASDAQ: XONE), in business since 2003, announced on January 9 its intent to raise as much as $75 million in this offering. With its most recent revenue at $19 million, it seems likely that ExOne will start out in the small-cap neck of the woods, though at present its S-1 (which you can view on the SEC website) does not state how many shares will be issued. There is an even smaller candidate already in the public marketplace, but it is listed on the OTC (though its share price in the upper 20s hardly qualifies it as a penny stock). Arcam AB (PINK: AMAVF) has a market cap that currently hovers around $100 million. Based in Sweden, it has a U.S. subsidiary and boasts a client list that includes Boeing, Airbus, and NASA. Though it lost money in 2008 and 2009, with diluted normalized EPS of ‒7.13 and ‒2.65 respectively, earnings climbed to 0.50 in 2010 and 1.50 in 2011. (Results for 2012 are not yet available.) Expect to see more companies in this sector come to market as the technology’s potential builds. Even Proto Labs, with a $1.03 billion market cap, just went public in late February 2012. There are naysayers, of course, with criticism typically aimed at the cost of the raw material used by these machines and the requirement for detailed schematics to actually generate an object. But the raw material would be expected to come down in price with wide adoption of this technology, and the “blueprints” for any number of objects could be sold just as computer software is. And just as has happened with computer software, the community would likely soon step in with both freeware and an Etsy-style “cottage industry” marketplace.
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