Sigma Labs Inc. (SGLB, Financial) – the provider of quality assurance technologies for 3-D printing – is flying high on its new closed-loop feedback control technology for additive manufacturing.
On Wednesday, Sigma Labs disclosed it has developed and demonstrated closed-loop feedback control for the metal laser powder bed fusion 3-D printing process.
“Automatic feedback process control was the next step in completing Sigma Labs’ suite of sensing, monitoring, and control capabilities of metal additive manufacturing (AM) processes. Our addition of real-time process control clearly sets Sigma as the leader in AM process quality assurance,” Mark Cola, CTO of Sigma Labs, noted in the press release. The market is ecstatic as the stock has gained an astonishing 92% on the news.
Sigma Labs is involved in the provision of real-time quality inspection solutions for metal additive manufacturing (3-D printing) customers. The company primarily serves aerospace clients, including Boeing (BA), GE Aviation and Honeywell Aerospace. Sigma is hoping to generate substantial revenue from its 3-D printing quality assurance technology, PrintRite3D, going forward.
Points of Interest
- 3-D printing original equipment manufacturers can benefit from the technology while boosting Sigma’s revenue.
Quality control improvements from Sigma can help companies like EOS GmbH and 3D Systems (DDD, Financial) as they offer metal laser bed fusion machines. Note that 3-D printing technologies, including selective laser melting (SLM), selective laser sintering (SLS) and direct metal laser sintering (DMLS) are based on powder bed fusion. Sigma can benefit if mainstream metal printing players like 3D Systems and EOS adopt its quality assurance technology. - Industry growth favors Sigma Labs.
Moreover, metal powder bed fusion is one of the fastest-growing additive manufacturing technologies. According to a report from ResearchandMarkets.com, industrial 3-D printing is set to grow at a compound annual rate of 27.2% between 2018 and 2023, with laser metal deposition (powder bed fusion) technology growing at the highest rate. The higher adoption rate of powder bed technology stems from its ability to produce complex designs with lighter material, allowing fast prototyping, according to a dated report from Persistence Market Research. The point is, adoption of powder bed in metal printing will also increase the need for real-time quality control technologies, such as those provided by Sigma Labs. - Financials look bleak, though.
Sigma Labs is a very small company with a market cap of approximately $13 million. Moreover, the company has yet to report material revenue. Revenue for the first quarter amounted to mere $103,000, down 10% quarter over quarter.
Furthermore, net losses are mounting as the company reported a net loss of $1.2 million, which is 10 times higher than the revenue generated in the quarter that ended in March.
Sigma Labs has been taking heavy losses for the past several quarters. As a technology company in early stages of product development, losses can be justified on the basis of heavy research and development expenses. The problem for Sigma Labs is the company isn’t spending much on research and development.
The chart above shows the company is spending around $100,000 on research and development, which makes up about 8% of the net loss generated by the company during the most recent quarter. With only $1.3 million in cash, the company is running out of time to generate revenue with its updated technology; cash burn for the quarter stood at $3.3 million. The point is, Sigma must increase its revenue substantially in order to cover high operating expenses. Whether or not the upgraded quality assurance technology attracts substantial revenue is yet to be seen.
Bottom line
Although the company revealed a groundbreaking real-time quality assurance tool, financial strength is lacking for Sigma to be considered a low-risk investment play. Moreover, the stock is already up 93% to date. Benefits, if any, are already priced in by the market. Therefore, investors should avoid the temptation to invest at the current price.
Disclosure: I have no positions in any stocks mentioned and have no plans to initiate any positions within the next 72 hours.
