cash is king
Stratasys Ltd (NASDAQ: SSYS) is at the forefront of the 3D printing and additive manufacturing revolution, offering unique large-scale investment opportunities to those passionate about leveraging cutting-edge technologies for potential financial growth. Stratasys was founded in 1989 With a rich history spanning decades, it has firmly established itself as an industry leader and is poised for extraordinary growth. In this article, we’ll take a closer look at why considering an investment in Stratasys stock could be an attractive proposition for investors seeking exposure to the exciting world of 3D printing.
Stratasys has been in the headlines recently for the formation of multiple potential bidders, and understanding the importance of these developments is critical to assessing its investment potential.The company has always been committed to technological progress and market expansion Diverse makeup looks Industries and applications. Here are some of the recent noteworthy news that have drawn attention to Stratasys:
Build strategic partnerships (value): Stratasys is actively committed to building strategic partnerships and collaborations with industry leaders. Such alliances and industry consolidation are intended to advance its technology and expand its market reach. Notably, Stratasys has been at the center of bidding wars from the likes of Nano Dimension (NNDM) and 3D Systems (DDD) due to its industry-leading scalability and profitability. These potential acquisitions and possible partnerships not only enhance Stratasys’ reputation but demonstrate its growth potential across various industries, and the stock is valued at more than double its current trading price.
Market expansion (growth): Stratasys has been making a concerted effort to expand its market share. Its focus has expanded from traditional industries to areas such as healthcare, automotive, aerospace and consumer goods. By diversifying its product portfolio and adapting its technology to meet the unique needs of different industries, Stratasys is positioning itself for future growth and relevance. This growth has been reflected in an upward trend in earnings per share and is expected to continue due to high-margin opportunities such as GrabCad print sales.
Innovative technology (diversification): The company continues to invest in R&D and innovation in 3D printing. Stratasys introduces novel materials and technologies (Figure 1) that expand the capabilities and applications of its products. Its commitment to pushing the boundaries of 3D printing technology is a strong sign of its growth-oriented strategy.
Figure 1. Stratasys is at the forefront of 3D printing technology innovation in multiple fields including healthcare
These recent developments demonstrate Stratasys’ dedication to innovation and its desire to remain a dominant force in the 3D printing industry. These developments and strategic moves not only raise eyebrows but also highlight the company’s potential for future growth. We believe SSYS is undervalued, trading well below historical averages and relative to its peers. We believe there is room for up to 90% upside to the stock’s current price due to the large amount of cash on hand and the ensuing bidding war for the stock.
When assessing a company’s investment potential in a growing sector, both current and future valuations are key factors to consider. Stratasys operates in a dynamic and evolving industry with tremendous growth prospects and hype. Assessing its valuation involves examining various financial metrics, understanding industry trends and considering future potential. One financial metric that makes SSYS stand out is its price-to-sales ratio. SSYS is one of the only 3D printing companies that has achieved significant scale, as can be seen in its revenue comparison with its peers (Figure 2).
Figure 2. SSYS is in a leading position in generating revenue and profits, which has allowed them to build a massive cash position of over $200 million
Likewise, SSYS is the only company in the 3D printing industry to achieve earnings before interest, taxes, depreciation, and amortization (EBITDA) (Figure 2). This industry-leading valuation and future growth potential make Stratasys our favorite name in the industry. It is worth noting that net profits have been on a downward trend since the COVID-19 pandemic, possibly because companies are less willing to spend on R&D in this unpredictable high-inflation environment. We believe this is the main reason why SSYS should accept a cash infusion investment from these bidders, as cash on hand is just over $200 million, average quarterly cash burn is ~$40 million (6 quarters behind), and SSYS is only a year ahead of this Half the time. Cash becomes an issue unless they purchase from NNDM and/or DDD.
The 3D printing market is expected to grow significantly in the coming years as Stratasys becomes a major player in the industry. This is what drives the cash-rich Nano Dimension and DDD system bids. Stratasys prefers to remain dominant rather than follow Desktop Metal (DM), hoping to build new synergies across its already broad product portfolio. We do not believe this acquisition is realistic for SSYS given the cash available on hand and DM’s current cash burn.
Essentially, Stratasys’ valuation should be considered in conjunction with its position in a rapidly growing industry, its competitive advantages, and its potential for continued innovation and revenue expansion. Competitors value SSYS at twice the current price ($24-$27), which is why we believe this name has up to 90% upside potential for long-term investors (1.5-3 years).
SSYS does trade at more than 68 times earnings, and while the stock may appear to be trading at a premium when considering more established non-additive manufacturing technology stocks, this may reflect investor confidence in the company’s future prospects. Dynamic 3D printing field. The stock trades at a discount of more than 20% to most historical valuation metrics (EV/sales, P/E, P/E) and even to its closest competitors in a sector that has been priced in based on allocated risk. Beat down to or below book value. We see these undervaluations turning into valuation premiums as macroeconomic conditions change in the future.
Before making an investment decision, it is important to evaluate the inherent risks associated with investing in Stratasys. Like other industries, the 3D printing industry faces specific challenges and uncertainties that can impact company performance. Some of the main risks to consider include:
market competition: The 3D printing industry is highly competitive, with many companies vying for market share. Stratasys faces competition from established companies and emerging start-ups, and its ability to maintain a competitive advantage is critical to its long-term success. Market competition and industry consolidation can lead to dilution and reckless decision-making by any group in the industry.
skill improved: The rapid pace of technological advancement can render existing products and technologies obsolete. Stratasys must continue to invest in research and development to stay ahead of the curve and adapt to emerging trends. History has proven that subtractive manufacturing technologies such as CNC are more useful, but new adoption in the additive manufacturing industry could provide a catalyst for stock prices.
economic factors: Macroeconomic recession and volatility may impact demand for 3D printing solutions. Stratasys’ revenue streams may be sensitive to broader economic conditions, posing potential risks to its financial performance during periods of economic uncertainty. If inflation persists longer than expected, rising interest rates should be viewed as a long-term lag for stocks.
Operational challenges: Stratasys must effectively manage its operations, production and supply chain to meet customer demand. Disruptions or inefficiencies in these areas could impact the company’s ability to deliver products and services on time. This has been a problem faced by many young technology companies, from additive manufacturing to lidar and beyond.
Debt is not a major issue for SSYS, with only about $20 million on its balance sheet as of late. Potential investors must conduct a thorough risk assessment, taking into account specific industry dynamics and the company’s ability to effectively address these challenges. While Stratasys has a proven track record and bright growth prospects, recognizing and mitigating these risks is critical to making informed investment decisions.
“In God we trust. All others must bring the data” – Robert Hayden
Understanding the company’s history, unique attributes, and achievements can provide valuable insights to investors considering Stratasys stock. Here are some interesting facts about Stratasys’ growth:
Stratasys was founded in 1989 by Scott Crump and his wife Lisa Crump. Scott Crump is credited with the invention of fused deposition modeling (FDM), a key 3D printing technology that forms the basis of many Stratasys products. Stratasys continues to expand its materials offerings beyond 116 materials now availableenabling customers around the world to print in a variety of materials, including plastics, metals, and even environmentally friendly biocompatible materials for many different applications.
These interesting facts highlight Stratasys’ legacy of innovation, its commitment to serving diverse industries, and its focus on advancing 3D printing technology for commercial and educational purposes. These qualities and more give the company a unique position in the world of 3D printing.
All in all, Stratasys Ltd. presents an attractive investment opportunity for those seeking to enter the dynamic and rapidly growing 3D printing industry. Recent news and bidding wars highlight the company’s dedication to innovation and pursuit of strategic partnerships to expand its market reach. However, investors must recognize the inherent risks associated with this industry, including increasing competition and economic uncertainty.
Stratasys’ valuation should be viewed in conjunction with its potential to capture a larger market share in the booming 3D printing space than its less risky competitors. We believe SSYS has the potential to nearly double their price if they choose to accept the buyer’s offer. The worst-case scenario is that they buy Desktop Metals rather than accept these bids, macroeconomic conditions decline and cash burn increases. Ultimately, investors should conduct thorough research, assess their risk tolerance, and adjust their investment objectives before making any decisions regarding Stratasys stock. As with any investment, due diligence is critical, and in the ever-evolving world of 3D printing and additive manufacturing, a smart approach will help make informed investment decisions.