ExOne (XONE, Financial) underperformed in the recently reported quarter. The main reason behind its weak performance was weakness in the machine segment. Still, ExOne is counting on some key initiatives which it thinks will be growth drivers in the fourth quarter. It is mainly concerned about the irregularity of shipping demand in some of the key markets such as India, China and Slovenia. The company is now focusing on increasing its customer base to get over this weakness. Besides the machine segment, ExOne is also seeing some bright opportunities in the other segments also.
Seeing growth across segments
The company is pleased to see 40% growth in the non-machine revenue. It is pleased with this positive news, and it is confident of maintaining this positive high growth momentum in the future as well. in addition, ExOne also has many key pricing strategies which are expected to drive large volume orders in its PSCs, further giving the company good opportunities of outperformance in future. Moreover, ExOne is expecting these new large frame orders to have an incremental effect driving both of its top line and profit margins.
ExOne is doing well in the domestic as well as the international market. The company is seeing bright growth opportunities in America where its R&D efforts are really paying off which is attracting many funding specific customers to share their hands in its machine segment. While in Europe, ExOne is not seeing up-to-the-mark performance to softer economies which is compelling softer customer spending. However, this doesn’t affect its financial much as the company is seeing good growth in the non-machine segment which is off setting the negative effect of the soft European economy.
Product development and key partnerships
The company is now gearing itself to improve the quality and standard of its products to gain more recognition around the world. It now more engaged in R&D activities especially in the marketing and sales area. It is also investing meaningfully in key initiatives to improve its quality. Moreover, the prime focus of the company is to attain ISO certification to make its products attractive meeting the quality standards.
To improve its business, ExOne is also engaged in multiphase rollout of a new ERP system which is expected to be a long term prospect to the company as it is expected to continue till 2016. The company is expecting better work flow with this which will help it to carry its operations effectively with ease creating better opportunities for the company to outperform in future. Further, ExOne is also focusing on uplifting the performance across the European markets. In this its adding significant capacity in Europe which it thinks will drive good results in 2015 as well.
ExOne is also striding for making room in the thermal conductivity. It is mainly focusing on standard set of materials such as carbon and graphite as these materials are well suited for the oil and gas industry as well as in the aerospace industry. With this, ExOne is expecting good progress opportunities in these regions.
Conclusion
The company might be a weak performer as of now but its efforts to be profitable and the transitioning economy is showing positive signs. The stock can be a good long-term holding as its earnings are growing with a CAGR of 56.00% which is way better than the industry average of 14.10% this makes it a bright opportunity for the long term investors to invest in ExOne as it will be a solid stock to hold now.
