3D Systems Corporation (DDD) and Stratasys Ltd. (SSYS) are two notable manufacturers of 3D printers and 3D production systems. DDD offers 3D printers, such as stereolithography and color jet printers that transform digital data input generated by 3D design software. SSYS provides entry-level desktop 3D printers for rapid prototyping, and production systems for direct digital manufacturing.
Last year, the 3D printing sector was hit hard after manufacturing slowed due to the public health crisis, which reduced demand for 3D-printing products and services. However, with the gradual economic recovery, the sector is gaining again because manufacturers are increasingly looking to scale up their 3D printing for production parts. In addition, the increasing application of 3D printing technology in the healthcare sector could be a key growth driver for global 3D printing leaders such as DDD and SSYS this year and beyond.
While SSYS has returned 70.6% over the past five years, DDD gained303%. In terms of past six-month performance, DDD is the clear winner with 312.4% returns versus SSYS’s 105.2%.
But which of these stocks is a better pick now? Let’s find out.
DDD recently completed the sale of its Cimatron and GibbsCAM software businesses to a subsidiary of ST Acquisition Co., an affiliate of Battery Ventures, for approximately $64.2 million in cash. This will strengthen DDD’s balance sheet and enable it to pay off the outstanding debt.
On November 17, DDD announced that it has received FDA clearance for the Vantage Ankle PSI – its patient-specific total ankle surgical planning and 3D printed instruments, which it developed in partnership with Exatech. This will allow DDD to expand its applications that benefit the medical community and to stand out as a pioneer in the personalized medicine space.
In January, SSYS announced that it has completed the acquisition of Origin. The company expects that this acquisition would help it to fortify its leadership position in the polymer 3D printing industry and generate meaningful incremental revenue from a wide range of new market opportunities.
In mid-December, SSYS announced a new API program to integrate its 3D printers in production environments on the factory floor via the GrabCAD Software Development Kit. This improved API connectivity could open the door to new business models for the company and help it cater to a wider range of customers.
Recent Financial Results
In the third ended September 30, 2020, DDD’s revenue declined 13% year-over-year to $135.1 million. The company reported an EPS loss of $0.61 over this period. DDD’s revenue from healthcare increased 6.1% from the year-ago value to $59.8 million, driven by stronger sales to the dental market, while industrial sales decreased 23.8% to $75.3 million, compared to the same period last year.
SSYS’s revenue for the third ended September 30, 2020, decreased 18.8% year-over-year to $127.9 million, driven primarily by the pandemic’s adverse impact on the company’s customers across the industries into which it sells its products and services. SSYS generated $2.6 million of cash from operations, while its cash, cash equivalents and short-term deposits were $308.2 million at the end of the third quarter.
Expected Financial Performance
Analysts expect DDD’s revenue to increase 3.3% in the current year. Its EPS is expected to grow 372.7% in 2021. Moreover, its EPS is expected to grow at a rate of 10% per annum over the next five years.
Analysts expect SSYS’s revenue to increase 6% in the current year. The company’s EPS is expected to grow 118.4% in 2021. Its EPS is expected to grow at a rate of 36% per annum over the next five years.
DDD’s trailing-12-month revenue is 1.02 times SSYS’. But SSYS is more profitable with a gross profit margin of 45% versus DDD’s 40.8%.
In fact, SSYS’s levered free cash flow margin of 3% compares favorably with DDD’s 0.4%.
In terms of trailing-12-monthPrice/Sales, DDD is currently trading at 5.99x, 84.9% more expensive than SSYS, which is currently trading at 3.24x. Its trailing-12-month EV/Sales of 6.42x is 136% higher than SSYS’s 2.72x.
Thus, SSYS is the more affordable stock here.
While DDD is rated “Buy” in our proprietary POWR Ratings system, SSYS is rated “Strong Buy.” Here are how the four components of overall POWR Rating are graded for DDD and SSYS:
DDD has an “A” for Trade Grade, a “B” for Buy & Hold Grade, a “D” for Peer Grade, and a “C” for Industry Rank. In the 6-stock Technology – 3D Printing industry, it is ranked #4.
SSYS has an “A” for Trade Grade, Buy & Hold Grade and Peer Grade, and a “C” for Industry Rank. It is ranked #1 of 60 stocks in the same industry.
While both DDD and SSYS are good investment bets considering the factors discussed here, SSYS appears to be a better choice because it is a cheaper and more profitable investment option to benefit from the industry’s growth.
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SSYS shares were trading at $35.11 per share on Tuesday afternoon, up $3.26 (+10.24%). Year-to-date, SSYS has gained 69.45%, versus a 1.31% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...
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