3D Systems (NYSE:DDD) is not doing well this year. Despite the fact that the organization reported great development in revenue in the last reported first quarter, its earnings plunged on the excess of investments to develop the business. This looks like a smart move, as analysts expect the 3D printing industry to develop at a stupendous rate of 45% per year work 2018, hitting a size of $16.2 billion, as indicated by Canalys.
Be that as it may, this massive development in the 3D printing industry is pulling in more competitors that are testing 3D Systems. Hewlett-Packard (NYSE:HPQ), for instance, as of late declared that it will be entering the business 3D printing business sector, intensifying the opposition in the industry. However, besides HP, there are five other critical reasons that could harm 3D Systems going ahead. How about we look at them.
- Warning! GuruFocus has detected 5 Warning Signs with DDD. Click here to check it out.
- DDD 15-Year Financial Data
- The intrinsic value of DDD
- Peter Lynch Chart of DDD
As discussed prior, the prospects of the 3D printing industry look tempting, which is pulling in a lot of huge players. Hewlett-Packard is currently adapting to enter this business. Last month, HP CEO Meg Whitman uncovered the organization's plans for the 3D printing business. Likewise, HP's strong fiscal position will be a key reason why it can establish its presence in the 3D printing business sector. It has a cash parity of $15 billion and spends handsomely on research and advancement, which gives it enough fire force to address the 3D printing fortune.
Patents to lapse
Numerous 3D printing patents are lapsing. As a result, 3D Systems' sovereignty fees will take a hit. An alternate risk for the organization is that the patent expiry will permit a lot of people small companies to take a chomp of the 3D printing fortune. Prior, as the smaller companies were not equipped to manage the cost of the sovereignty fees, they stayed far from the business sector and held up for the patents to lapse. Case in point, the attack of financial speculators such as Harbor Capital Group, will prompt development in the amount of start-ups looking to address the 3D printing fortune.
An excess of acquisitions
3D Systems has made aggressive acquisitions which have harmed its profit margins. Indeed, the organization has obtained more than 40 companies in the past few years, and it isn't carried out yet. As of late, 3D Systems weakened shareholder esteem by striving for a secondary advertising. It offered 5.95 million shares, raising around $317 million. The organization will use the proceeds to make more acquisitions.
The issue is that these acquisitions don't seem to be procuring any results. Conceivably, acquisitions should lead to earnings growth, yet this hasn't happened. In the first quarter, 3D Systems' earnings declined 17% year over year, despite the fact that the organization proceeded with its quick acquisition pace.
Speed and evaluating
High value and low speed are the two fundamental hurdles in 3D Systems' development story in the industrial business. In the event that 3D Systems plans to bring out another 3D printer with lower cost and higher speed, it will need to make aggressive investments in various R&d initiatives. Then again, its rivals such as HP stand strong with a robust R&d plan and are in a superior position to invest in the advancement of ease high velocity 3D printers.
Besides, numerous companies are making advances to create super fast 3D printers. Case in point, Cincinnati Inc. has entered into a partnership with Oak Ridge National Laboratory to create super fast 3D printers. The anticipated printing speed of these printers may be 200 to 500 times faster than the existing 3D printers. Also, they are required to be fit for printing components that would be 10 times bigger.
So, 3D Systems is confronting threats from various quarters. Also, there are various investors wagering against the stock, as prove by a short buoy of 32.7%. Likewise, the stock is exceptionally expensive at 125 times last year's earnings, and considering that its earnings are declining, it doesn't bode well for invest in 3D Systems.