Lately, the stock market is on fire. Despite a pandemic, the S&P 500 and the Dow Jones Industrial Average are setting new records. A lot of the positive momentum is due to electric vehicle (EV) stocks and alluring SPAC plays. However, that doesn’t mean there aren’t other sectors worth exploring.
Case in point? 3D printing. You might write it off as a hobby or trend, but 3D printing is actually an up-and-coming industrial foundation for several successful businesses and corporations.
In fact, the worldwide market for 3D printing products and services is expected to exceed $40 billion by 2024. The pie is so large that several startups focused on the niche have become listed companies in just a few short years. However, there are also several diversified conglomerates to choose from, too.
This list provides a mix of stocks — established names as well as companies you may have never heard of — to get you started as you look at investing in this unique space.
- HP (NYSE:HPQ)
- Proto Labs (NYSE:PRLB)
- Stratasys (NASDAQ:SSYS)
- ExOne (NASDAQ:XONE)
- Align Tech (NASDAQ:ALGN)
3D Printing Stocks to Consider: HP (HPQ)
HP is the world’s 2nd largest personal computer (PC) vendor by unit sales as of January 2021, following Chinese company Lenovo (OTCMKTS:LNVGY). According to Yahoo! Finance, the company is divided into three segments: “its personal systems, containing notebooks, desktops, and workstations […] its printing segment which contains supplies, consumer hardware, and commercial hardware […] and corporate investments.”
Considering the diversified nature of HP’s operations, it’s tough to point out exactly how much revenue its 3D-printer division is making. Overall, though, the company has outperformed analyst expectations regularly, recording six consecutive quarters of positive earnings beats. That underlines the consistent nature of its performance. Nevertheless, the pandemic has definitely affected supply chains. It has also led to the slowdown and cancellation of various trade shows, which impacted the printer division’s bottom line.
Although the company hasn’t provided commentary on 3D printer sales, President and CEO Enrique Lores has noted that the crisis has affected the business in some ways:
“Turning to our results, there is no doubt that COVID-19 is impacting our business. While some areas performed very well as people shifted to work from home, others suffered and we faced supply chain disruptions.”
Regardless, when you invest in HPQ stock, you do gain exposure to a company with a long history, sound fundamentals and an excellent outlook. Plus, at 10.27 times forward price-to-earnings, it has a very attractive valuation.
Proto Labs (PRLB)
Proto Labs is a digital manufacturer of on-demand 3D-printed parts for “prototyping short-run production.” The company has locations in Europe, Japan and the United States and markets its services to customers who use 3D design software to engineer products in a variety of different sectors.
Although the company is pure play, it’s firing on all cylinders. PRLB stock is up about 107% over the past one year and 240% for the past five. Sales have also grown by 14.24% over the past five years. Moreover, its gross margin is 50.28%, which compares very favorably to the industry average. From an investor’s point of view, though, I would want to see some better action on the return on equity (ROE) end. It stands at 9.49%, a poor conversion rate for such an excellent gross margin.
The company expects sales and EPS growth of 7.7% and 2.4% next year. The only thing going against PRLB stock is valuation. Shares are trading at 88.7 times forward price-earnings. Over the past five trading days, the stock has been down. I would wait for shares to drop a bit more before buying in.
Stratasys is an American-Israeli producer of 3D printers and production systems. Further, its products have fairly wide range. In a U.S. Securities and Exchange Commission (SEC) document, the company noted the following about its business:
“Our solutions are sold under eight brands, with products ranging from entry-level desktop 3D printers to systems for rapid prototyping, or RP, and large production systems for direct digital manufacturing, or DDM, and related services offerings. We also develop, manufacture and sell materials for use with our systems.”
SSYS stock has outperformed the S&P 500 and its sector significantly over the past year, with a current one-year return of nearly 168%. That kind of price performance is not surprising, with the company surpassing expectations often. Most recently, though, Stratasys reported a Q3 non-GAAP net loss of $3 million, or 5 cents per diluted share compared to non-GAAP net income of $6.3 million, or 12 cents, for the same period last year.
Like other names on this list, there are overvaluation concerns when it comes to SSYS stock. For fiscal 2020, sales are expected to decline 19.3%. Nevertheless, in the last three months, the shares are up nearly 242%. That means investors are already pricing in the rebound before it has happened. On Tipranks, the stock’s 12-month price target is currently $25.67, a roughly 48% downside from today’s price.
ExOne is a provider of 3D printing machines, materials and services to industrial customers. Its business consists of manufacturing and selling its tools and printing products to specification for customers using its installed base of 3D printing machines, which deposit successive thin layers of materials — such as silicate sands, metal or ceramic powders — in a build mold.
The company offers its products and services through operations in Germany, Italy, Sweden, Japan and the United States. Much like the other companies on this list, XONE stock is also soaring, with shares up 663% in one year at the time of this writing. Sales are expected to have grown 10.3% in 2020 and should grow 15.6% in 2021. But that doesn’t necessarily lead to triple-digit gains.
As the old adage goes, don’t count your chickens until they’re hatched. If you look at the way markets have functioned over the last year, no one is really paying attention to that idea. But separation between fundamentals and price performance is never great. Still, for this sector, ExOne makes my list as a solid 3D printing play.
Align Technology (ALGN)
This company is primarily known for its Invisalign system, an orthodontic alternative to traditional braces. However, it also produces intraoral scanners as well as computer-aided design and manufacturing tools for customizing its well-known dental liners
Despite the pandemic, this company has also had an excellent 2020. ALGN stock has outperformed both the S&P 500 and its sector in the past year. It has also reported several positive earnings surprises. For 2020, total revenues climbed 2.7% to a record $2.47 billion.
Analysts forecast revenues to grow 39.1% and 21.7% in fiscal 2021 and 2022, respectively. So, it’s no surprise that shares are trading at 67.37 times forward price-to-earnings. I would wait for that to cool down a bit before buying into this stock. The company is a solid investment, but overvaluation concerns are real.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.
View more information: https://investorplace.com/2021/02/five-hot-stocks-winning-3d-printing-technology/