3D Systems Struggling With Demand Issues, Tough Competition
Zacks Investment Research | Jun 21, 2017 09:53PM ET
Despite being a market leader, 3D Systems Corporation (NYSE:DDD) has been straining under capricious demand and tough competition in recent times. Let’s delve into the prospects of the industry and how much 3D Systems can capitalize on the same.
3D Systems: As We Know It
In 2016, 3D printer sales growth decelerated, reflecting a slowdown at 3D Systems and Stratasys Ltd. (NASDAQ:SSYS) , the two industry leaders by revenue. The industry’s sales grew by 17.4% in 2016, according to Wohlers Associates — down 26% growth recorded in 2015. The downturn was led by decline in the performance of 3D Systems and Stratasys, which together made up 22% of industry sales last year. Excluding these two market leaders, industry sales rose 25%, per the data.
Likewise, 3D Systems enjoyed rapid growth from 2010 to 2014, but it has since struggled to maintain that rate. Its revenues grew just 1.9% in 2015, and it actually contracted in 2016. A lack of meaningful product roll-outs and streamlining low-margin businesses restricted revenue growth. Further, growth could have become harder to come across as the company became less acquisitive in recent years, and relied largely on organic growth.
In early 2017, we saw some slightly optimistic numbers, as top line grew 3% year over year — driven by improved demand among industrial, healthcare and materials customers. Looking to the future, 3D Systems has guided revenue growth of 2-8% for this year, including about 200 bps contribution from the Vertex acquisition. Effectively, organic growth expectations stand somewhere around 3%, at the mid-point of guidance.
This doesn’t seem so downbeat. However, when you take the company’s current valuation into account, it just might. The company is trading at a trailing 12-month PE Ratio (Price to Earnings ratio) of a whopping 94.30, which is miles ahead of the Zacks categorized Original post
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