3D Printers Now a Novelty - Soon to Transform Auto's, Airlines and Dentistry

Myron Goldstein  |

In many high school shop classes across the country, there is an excited teacher writing lesson plans for 3D printing projects. Many school principals might have spent a majority of their budget acquiring one of these machines. Currently, 3D printers are slow and relatively useless. They will print you a toy model in four hours and that is basically the end of its appeal. However, this novelty item has the potential to revolutionize production lines.

Think about the potential in the auto industry. Right now, auto makers order parts and supplies from multiple manufacturers but with more advanced 3D Printers auto makers could manufacture everything under one roof. What about healthcare? The current process for making a denture mold is reminiscent of the ancient Egyptians. The process is long and painstaking, but 3D printers could take uploaded scans and fabricate the mold.

At the International Consumer Electronics show in Las Vegas, HP claimed that its 3D printers could make 12,600 copies of a plastic gear fitting in the same time a current 3D printer made only a 1,000. The printer, by layering plastic through the guidance of a computer generated design, can easily fabricate plastic parts and pieces. However, the real accelerator in the industry will begin when 3D printers start to manufacture metals and ceramics. A printer that can download specs on a timely basis and begin making molds and parts right away will cut efficiency quotients in half.

Industry leaders are starting to position themselves for this new technology and trying t understand how it can be used on production lines. Companies like HP, mentioned above, UPS, GE, BMW and Boeing are all working on prototypes or investigating potential inroads to the space. 3D printers have massive appeal because they can run off so many parts or products autonomously. Now, there is still much tinkering and modifying that needs to be done for this to work to its full potential. The problem now is that layered molds can splinter and break, but Google is developing a printing method where light is projected through a pool of resin until the mold is hardened and fully formed. This method takes less time and creates more solid and stable objects.

According to a survey by Gartner, 3D printing spending will rise to $3.97 billion by next year. The projections for this year are a little over $2 billion, which would practically double the amount of spending. GE announced this year of a research center in Pittsburgh that would focus exclusively on finding ways to implement 3D printing across various industries.

Here are the companies in the sector worth looking at and a brief thumbnail of what they do. The trading action is described to give a macro picture of the sector and is not intended to be advice to buy or sell.

3D Systems (DDD) - Manufactures 3D printers that can use a variety of materials from plastics and metals to nylon, rubber, and composites. Sells consumables as well as the printer. This is the pedigree of the group right now at just under $2b Market Cap. At the time of writing (Aug 24, 16) the stock is up 85% for the year. Keep in mind here (some perspective)shares in 2014 were $90 and proceeded to trade lower for the next two years to $7 per share where they looked to make a bottom in January of this year. This frustrated many investors (including my Mother ) who were shaken out during this decline. The question is can they retrace some of this loss and head back to $25 or $40 from the current $16 level? I would watch revenue - not expectation of rising tides lifting all 3D Boats.

Stratasys (SSYS) – Their printers focus on plastics and metals with a specific focus on the dental industry. They sell both printers and consumables. Stratasys is flat for the year and is a $23 dollar stock with a $1.2B Valuation (MarketCap). The entire sector suffered pullbacks as mentioned above and SSYS is little different having traded above $100 for more than a year in 2013 and 2014 only to decline to current levels. I must say I like this stock because it is in the dental industry and has few peers. Take some time to learn about the company margins and listen to the conference calls, they are a unique player in the industry.

The Exone Company (XONE) – Uses an internally developed binding technology with a focus on the industrial segment of manufacturing. Also operates service bureaus where customers can have XONE produce parts for them. Currently shares in ExOne are $14 per share and are up 34% this year. This is a retest of this $14 level and I would pay attention to this sector as industrial manufacturing will at some point get traction. This is a smaller version of the two stocks above at $230M valuation, and would not be surprised to see this one grow as market matures. Again these stocks got ahead of themselves and this stock was $65 in January 2014.

Materialise (MTLS) – Belgium based company that sells software that allows the computer generated designs to talk to the 3D printers. Materialise has had a tough go of it down 11% in 2016 and is off 60% since coming public . They likely will make some changes if they don't meet upcoming numbers, and you will need to watch and wait for other software solutions to come to market. Personally I think they missed the boat.

Voxeljet (VJET) – German based company that builds printers as well as operates service bureaus for customers to generate their own parts. VJET has been dead money for 2 years and it seems the printer part of the business is dangerous. This stock has shaken out retail and institutional shareholders alike and seem vulnerable to other outside forces. I can say at $4 and change you know exactly what you can lose as stocks cannot go below zero. But 2 year dead money means management changes will also come for this sub $100M Marketcap .

Watch carefully before investing in any stock in this space. The sector is cool and has growth but the run up has created a misunderstanding of the valuations by everyone - traders, analysts and the companies themselves. Our best advice at Equities.com is to let the mainstream revenue take hold so the dust can settle. At best the industry which got so far ahead of itself is now in a position to begin recognizing and predicting revenues for the future, and from the recent bottoms create a better picture for valuation- and each of these companies Market Caps.

Equities.com was not compensated by any company mentioned in this article nor do we own shares in any of the stocks mentioned.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.

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