The maker of 3D printers, Stratasys (SSYS, Financial), reported good growth in the second quarter, reporting an organic revenue growth of about 35% that was over threefold of the revenue 3D Systems (DDD, Financial) had generated in the same quarter this year of late. Stratasys was pleased to observe tremendous growth in its high-end systems and materials, along with MakerBot’s product and services that continue to win additional market share for the company.
Strong results and impressive an outlook
The Eden Prairie, Minnesota-based company posted revenue of $178.5 million, an increase of about 67.29% as compared to $106.7 million in the year ago quarter, outpacing the consensus estimates of $156.6 million in revenue for the second quarter. Stratasys’ net earnings appreciated about 22% to $0.55 per share from earnings of $0.45 per share in the same period a year earlier. The analysts had estimated earnings of $0.45 per share for the second-quarter 2014.
Looking beyond, Stratasys certainly should have better days ahead as the stock is poised to deliver strong growth this year. Zack consensus forecasts EPS growth of 48.2% for the stock this year, providing a strong buy rating for the stock. Stratasys had posted earnings per share growth of approximately 46.5% last year 2013.
Moreover, the company expects earnings per share to grow in the range of $2.25 per share to $2.35, which is well ahead of consensus estimates on earnings of $2.20 per share for the full year. Its revenue for the full year is anticipated to range from $750 million to $770.0 million; that remains above $683.00 million revenue estimated by the analysts for the year 2014. The company also sees its organic revenue grow approximately 30% for the full year 2014 due to strong and continuous demand for its higher performance systems and materials.
Opportunities under consideration
Stratasys foresees tremendous growth opportunity in the education business division, especially the teaching institutes that are driving growth for its 3D printing technologies. The maker of 3D printer is endlessly observing a positive sales fashion in the numerous entities, due to inspiring conversion of its printing prospectuses that are encouraging school districts to furnish multiple schools at one go with its 3D printing technologies.
Alongside, the company is also engaged in integrating its vastly appreciated offerings with that of MakerBot’s product and services and Idea Series systems that could generate favorable returns and increase its margins this year as Stratasys looks determined to cater into the higher-education division with its high-end systems and materials.
Meanwhile, the market for the industrialized prototyping, educational and high-end laypersons is expected to create amazing money for the 3D printer maker companies such as 3D Systems, Proto Labs (PRLB, Financial) and Amazon (AMZN, Financial). Also, one of the Jeffries' analysts Jason North, has said that the total diffusion of this market at present remains just between 9% and 23%, which is not even one-fourth of the total market capacity.
He further forecasts total market penetration for this segment to grow more than 79% in the coming three years. Stratasys looks confident to take the bigger piece of this market competence as the company has a broad portfolio of products and services which is efficiently leveraged along with its out-and-out channel strategy for industrialized prototyping, educational and for the high-end laypersons who should lend a hand to the company addressing the different characteristics of this division.
Stratasys is additionally investing in various projects that should assist the company in executing its strategies effectively such as headship in prototyping, the nonstop development into its direct digital industrialized, the introduction of new niche vertical applications, increasing up-to-date solutions to markets, enhancements in 3D printing user-friendliness and progresses in customer familiarity.
These ongoing investments, followed by fruitful acquisition of Solid Concepts and Harvest Technologies, should drive growth for the company going forward. Besides, Stratasys is actively integrating the products and services of these companies with its capabilities to construct a leading strategic platform concentrated in meeting customers’ preservative manufacturing needs.
Stratasys will also benefit largely from its recently acquired MakerBot’s products and services. The company is rapidly increasing the shipments for MakerBot’s recently launched fifth-generation products and services that are gaining tremendous market traction worldwide. The company has also built strong relationship with channel distributors such as TechData in North America, Anatek in the Central America, Stratasys Japan in the Asia-pacific region, and newly acquired, HAFNER’S BURO in Europe should assist the company penetrating effectively in the global market.
Moreover, the company is experiencing strong demand for MakerBot’s entire product profile as it continues to improvise MakerBot’s 3D Printing Ecosystem, eliminating difficulties entitled with 3D printing that should accelerate its efficiency for products and services. With such productive improvisations on the cards for MakerBot’s 3D Printing Ecosystem should possibly help the company realizing greater sales in the second half of the year.
Wrapping up
Stratasys is currently trading at the forward P/E multiple of 36.81 and carries PEG ratio of 2.51 that represents reasonable growth for the stock in the future. Besides, the company has total operating cash flow of $43.85 million and free cash flow of $24.65 million, while it has no debt outstanding till date. Moreover, the analysts have estimated CAGR of 20.00%, which is higher than average industry CAGR of 13.65% for the next five years, highlights tremendous growth prospects for the company going forward.
