3D Systems

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1. The Move

3D Systems rose 194 bags, from the October 1992 low of $0.5 to the January 2014 high of $97.28:

The stock went mostly sideways for the years between 1992 and 2009, so I think it will be more useful to consider the move from the March 2009 low of $1.25, which produced 78 bags.

2. Business Description

More than 30 years ago, 3D Systems brought the innovation of 3D printing to the manufacturing industry. Today, as the leading AM solutions company, it empowers manufacturers to create products and business models never before possible through transformed workflows. This is achieved with the Company’s best-of-breed digital manufacturing ecosystem – comprised of plastic and metal 3D printers, print materials, on-demand manufacturing services, and a portfolio of end-to-end manufacturing software. Each solution is powered by the expertise of the company’s application engineers who collaborate with customers to transform manufacturing environments. 3D Systems’ solutions address a variety of advanced applications for prototyping through production in markets such as aerospace, automotive, medical, dental, and consumer goods. More information on the company is available at www.3dsystems.com.

3. Fundamental Situation at the 2009 Bottom

4. Fundamental Situation at the Top

5. Brief Story

At the 2009 bottom, 3D Systems was a moderate growth company (Revenue CAGR over the previous decade was 3.5%), and it had relatively small annual losses at the net income level. The Balance Sheet was healthy, with a Net Cash position of $22 M and valuation was low for a company involved in a growth industry like 3D printing, since the price to sales ratio was just 0.6, and the price to book value was 0.8.

Between 2008 and 2013, Revenue multiplied by 3.7 times (29.8% CAGR), EBITDA grew from $1.2 M to $98 M, and the company went from a $6.2 M Loss to a $44 M profit in 2013. Valuation skyrocketed to a sales multiple of 19 and a p/e ratio of 217, and that was the top.

6. Conclusion

3D Systems had significant Revenue ($139 M) in a growth industry, no debt, and low valuation multiples. When revenue finally increased meaningfully, the company started making a profit (and a growing one), and investors got very enthusiastic, stretching the sales and earnings multiple to extremely high levels. The company didn’t live up to those lofty expectations (in fact, it went back to losing money), and the stock came back down again.

César Borja

César Borja

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