3D Systems Corp. (DDD), Stratasys Ltd. (SSYS), ExOne Co. (XONE), and Voxeljet (VJET) have seen their stock prices drop in 2014 after the surge last year. Stock prices of the companies, except Stratasys, more than doubled in 2013, trading at valuations comparable to internet stocks during the dotcom bubble. 3D Systems – the largest 3D printing company in the world – and Startasys have seen their share prices tumble more than 40% and 18% this year, respectively.
3D printers gained popularity last year as an increasing number of manufacturers began using them in industrial processes. As of now, 3D printers are not used only for prototyping; in fact, they actually produce parts of the final product. Many view 3D printers as a technology that will revolutionize industrial manufacturing processes.
General Electric (GE) increased its usage of 3D printing in manufacturing processes in 2012 after its acquisition of Morris Technologies. Today, General Electric is the largest user of 3D printers in the world and is expected to maintain this status going forward.
GE uses 3D printing to print 19 fuel nozzles for its aircraft engines. Similarly, United Technologies (UTX) uses more than 24 3D-printed parts in its Pratt & Whitney LEAP engines, 4,500 orders for which have already been placed.
3D printers are also being used in the healthcare industry. Today, more than 90% of all hearing aid shells are produced through additive manufacturing. Perhaps the biggest factor behind the popularity of 3D printers last year was their introduction into the retail market. The printers can be bought for as much as $1,500, and one can print toys and basic shapes from these tech marvels.
Sales for 3D printer companies increased 69.33% year-over-year on average in FY13, much less than the increase in stock prices of these companies last year. Slower-than-expected sales and weak guidance for 2014 have resulted in the decline of the share prices of additive manufacturing companies to decline this year. However, these stocks are trading at very high valuation multiples.
The additive manufacturing industry is trading at a forward one-year price-to-earnings (P/E) multiple of 58.9x, a premium of more than 270% to the S&P 500. The 3D printing industry is also relatively expensive to the S&P 500 on its price-to-sales ratio. 3D printing companies are, on average, trading at a price-to-sales ratio of 10.4x, a premium of more than 511% to the S&P 500 index.
Currently, the cheapest stock in the 3D printing industry is Stratasys, which is trading at a forward one-year P/E multiple of 49.7x, a discount of almost 16% to the industry average.
3D printing will surely change the way industries function in the future. Manufacturing processes will change significantly and companies can save a fortune in manufacturing costs. Lead times will also be reduced despite the complicated designs being made. However, these shifts may not materialize as fast as investors were hoping for after the sudden popularity of 3D printers.