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Three-dimensional printing was one of the hottest investment trends of 2013, hands down. Pure-play 3D printing stocks 3D Systems (NYSE:DDD) and Stratasys (Nasdaq:SSYS) rose by 160% and 68%, respectively.
But 2014 has been an entirely different story for these two companies. Amid speculation that they flew too high too fast, shares of DDD and SSYS have fallen by 26% and 14% since the beginning of the year.
While three months of poor performance doesn’t make a long-term trend, it’s still notable that the turning point for DDD and SSYS was right after the New Year.
In contrast, shares of a lesser-known “printing” company have risen by 7% so far this year.
That company is Proto Labs (NYSE:PRLB). While it’s not a pure-play 3D printing stock like DDD and SSYS, it’s often lumped into the discussion because of its similarly disruptive manufacturing technology. This chart shows the performance of these three stocks since the beginning of the year.
Instead of making 3D printers and accessories, Proto Labs uses 3D technologies, including 3D computer-aided design (CAD) and 3D printers, to manufactures prototype parts and small batch production parts. Examples of parts the company makes include toys, sporting equipment and internal engine components.
The specialty of this 3D printing stock is quick-turnaround and small quantities – two attributes that are extremely important to its customers, who are typically product developers.
A variety of 3D printing technologies has helped PRLB grow revenues by 270% since 2009. And they all come back to three things: low cost, quick turn-around and ease of communication with customers.
When PRLB receives a potential job order, the order comes through in 3D CAD. This allows the company to take the order over the internet, interpret the part the customer wants, make suggested changes and fire back a price quote.
Once the prototype design is approved, PRLB then uses 3D printers, CNC machining and injection molding technologies to quickly construct the functional prototype that looks, feels and performs like the finished product.
This entire process often takes less than 48 hours.
Now, I’ve spent a small amount of time in metal shops with welders and engineers who build prototypes for universities, artists and a variety of small businesses. There’s a lot of tinkering, screwing up, throwing away and starting over. And there is a lot of frustration too.
PRLB’s technology cuts all of this waste out of the system. And in today’s high-speed and competitive manufacturing world, product developers can’t screw around. They need to get from concept to part in a couple of days. Proto Labs serves that need perfectly.
One indication of this 3D printing stock’s success is its aforementioned revenue growth. Another is the quantity of orders it can handle – a metric that continues to rise for PRLB. In 2013, Proto Labs quoted on over 390,000 designs. Most of these it was able to quote within a day of receiving the order.
That’s why 86% of its clients were repeat customers last year. That’s a slight increase in customer loyalty over 2012, when 84% of clients were repeat customers. While PRLB takes in small orders on an individual product basis, it takes in a lot of orders from each client (most client relationships are confidential, although PRLB has a list of case studies here). And this repeat business is helping it build a stable company.
There is a lot more I could say about Proto Labs, but that’s all I have room for today. This is a 3D printing stock I believe investors can buy and hold for the long term since its technology eases many severe pain points for potential clients.
Proto Labs is also a company I’ve held in my Top Stock Insights advisory service since March 2013. The 60% gain subscribers have on the stock makes us a little biased, for sure. But nevertheless, as PRLB continues to build its business around 3D printing technologies, I expect it will further disrupt the “old” way of prototyping.
The One Stock to Own in 2014 — The Year Mobile Takes Over
On Dec. 31, something incredible happened. For the first time in history, the majority of Internet traffic originated from NOT from PCs or desktops — but from mobile devices including smartphones and tablets. We’re never going back. Mobile is taking over. And even though the biggest player in mobile, Apple, is selling over 200 million iPhones this year alone… here at Wyatt Research, we’re recommending the one company no one is taking about. The one reaping massive profits each time a new Apple or Samsung smartphone is activated. In fact, as mobile data usage explodes in the year ahead, its stock is set to soar! Shares are already on the move. So, before this stock moves any higher, read our latest report for all the details: Click here for the full story.