By Cephas (Own work), via Wikimedia Commons
Black bearAre the bears still sniffing at 3D Systems?
3D Systems (NASDAQ: DDD) has done well holding its place among the changeable tech stock set, but recent declines - not to mention a massive sell-off by founder Chuck Hull - has led to the bears slouching out of their caves.
But last week and during the first post-Easter trading sessions in New York 3D Systems has enjoyed something of a recovery, so is the company's decline over?
Seeking Alpha's Chris Lau thinks this is indeed the case and now is an opportune time for investors with an interest in stocks at this end of the tech market.
He gave five reasons why the 3D Systems retreat that began in January of this year is now over, starting with the company's strong sales figures for the October-December period of 2012, which included gross profit margins of 51.2 per cent.
Mr Lau also cited 3D Systems' diverse customer base - with none of its customers accounting for more than 10 per cent of its revenue - while its high price/earnings ratio is supported by strong revenue expansion across all its portfolio categories. Finally, a revenue rate of growth that exceeds increase in expenses and 2013 forecast are encouraging.
Indeed, 3D Systems is anticipated to expand at a rate of between 24 and 37 per cent this year, with earnings due to rise between $1.00 and $1.15 per unit (non-GAAP). 3D Systems' impressive growth has been thanks to a string of successful mergers and acquisitions, while demand in 2012 increased last year as 3D printing becomes more mainstream - a trend that is expected to continue.
Nevertheless, Seeking Alpha identified some worries that investors need to be made aware of, including 3D Systems' rising accounts receivables, which caused day sales outstanding to rise from 67 days in 2011 to 72 days the following year.
Moreover, bearishness crept up in trading in 2012 and now stands at 25.95 million shares, while the anticipation of strong demand for 3D Systems' products has already been priced in, leaving the stock vulnerable to unexpected drops.
There are other risk factors. In addition to being constantly compared with Stratasys (NASDAQ: SSYS), 3D Systems' total operating expenses have given cause for concern. Interest expense grew last year by six times compared to the prior 12-month period to $12.4 million, while depreciation doubled to $21.2 million.
Mr Lau stated: "3D Systems and Stratasys are heavily followed, and are outperforming the technology-heavy Nasdaq index over a one-year period."
However, he noted: "The short term underperformance of 3D Systems suggests that investors should be cautious. If profit taking dominates as the second trading quarter of 2013 begins, 3D Systems could continue to underperform. The drop in shares creates an opportunity for investors who missed the initial run-up."