Will 20% Sector Growth Support the Outrageous Multiples of 3-D Printing Stocks?
A recent report by the Feedonia group is bullish on 3-D printing growth through 2017, but industry numbers make one question the valuations of 3-D printing stocks. Typically, investors are willing to pay up for fast-growing stocks, but in certain scenarios the price paid can rob growth from future years. Review the Internet bubble years and see how even the top stocks spent years -- if not the next decade -- with revenue growing and the share price flat to down.
In this case, the top 3-D printing stocks -- 3D Systems (NYSE: DDD ) , Stratasys (NASDAQ: SSYS ) , and ExOne (NASDAQ: XONE ) -- trade at earnings and revenue multiples suggestive of explosive growth. In reality, industry demand is expected to grow around 20% according to Feedonia through 2017, or at about the same rate as the last five years. Other widely respected industry resources, such as Wohlers, place the growth at higher rates. Either way, the market growth is solid and supportive of strong stock valuations, but the gains in this sector in 2013 have priced in years of substantially higher growth.
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