Investors sent 3D Systems Inc. (DDD, Financial) shares sharply higher on Tuesday following the company's first-quarter financial report.
The 3-D printer company reported first-quarter GAAP earnings of 36 cents per diluted share compared to a loss of 17 cents per share in the prior-year quarter. Revenue grew 7.7% to $146.1 million from $135.6 million a year ago.
Reflecting on the company's performance, President and CEO Dr. Jeffrey Graves said:
"During my first year at 3D Systems, we established a clear strategic purpose that is driving our work every day: To be leaders in enabling additive manufacturing solutions for applications in growing markets that demand high-reliability products. We laid out a four-stage plan to reach that goal, and I am pleased that these efforts have contributed to impressive Q1 results."
Graves was particularly pleased with the company's strong performance in the health care segment, a promising market for 3-D printers. "Our Healthcare business continues to deliver exceptional growth, posting a 39% year-over-year increase, with strength in both dental and medical applications," he said.
Still, investors should temper their enthusiasm for 3D Systems and 3-D printing in general, as this isn't the first time the company's shares have rallied following a piece of good news and then retreated lower a few days later.
Three-D printing is a great industry because of the promise it holds to mass customize manufacturing. It is a poor investment, however, because it has yet to achieve the scale of operations that will boost the top and bottom lines of major 3-D printer companies.
Over the past several years, 3D Systems and Stratasys Ltd. (SSYS, Financial) have been plagued by declining revenue, negative operating margins and economic profits as well as poor stockholder returns:
| Company | DDD | SSYS |
| Three-year Revenue Growth (%) | -6.5 | -9.1 |
| Current Operating Margin (%) | -12.68 | -13.41 |
| Average Annual Total Return (2010-20)% | 6.67 | -7.94 |
| Market Price | $23.18 | $19.30 |
| Intrinsic Value | $8.06 | $17.92 |
| Company | ROIC | WACC | ROIC-WACC (Economic profit) |
| DDD | -12.76% | 8.67% | -20.09% |
| SSYS | -8.21% | 9.17% | -17.38% |
Meanwhile, both companies are trading above thier GF Value, especially 3D Systems.
The problem is simple: the two companies have yet to develop a suitable business model to ride the growth of the 3-D printing industry.
Investors should look elsewhere in the technology sector for better opportunities.
Disclosure: No positions.
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