The latter includes Stereolithography (SL), selective and direct laser sintering, multi jet fusion (MJF), PolyJet, and Carbon DLS. Proto Labs facilities are located in the US, the UK, Germany, and Japan.
What's the Idea?
Capitalize on a stock that may rise with better financial performance and 3D printing market boost.
Buy Proto Labs Shares >>
Why Trade Proto Labs?
Reason 1: Good Industry Potential
Parts of complex shapes made of non-standard materials are used in many areas, such as device and tool manufacturing, medical components, robotics, construction, etc. When making prototypes, 3D printing or injection molding are the most technologically advanced solutions.
In 2020, the 3D printing market was worth $16B; despite the pandemic, it is expected to reach $40.80B by 2024, with an annual growth of 26.40%, Statista Research reports. In case such expectations are met, Proto Labs may well benefit from it, as this is one of the largest players in the 3D printing and injection molding market. This can also be boosted with the company's business model, as it offers digital manufacturing, i.e. the customers may design the product they need themselves and then order its production and shipping.
In early February 2021, the company updated its platform by improving the project management system and interactive design to analyze the tech components; it also optimized the way the employees interact.
The production processes have been much simplified, thus adding yet another competitive edge. With more platform optimization and the general market recovery, Proto Labs may well expand its market share.
Reason 2: 3D Hubs Acquisition
In early 2021, Proto Labs acquired 3D Hubs for $280M, with additional payments to the previous owners of up to $50M scheduled for the next two years.
3D Hubs is a platform where one can order 3D printing for any complex parts they need. Before being acquired, the company had over $25M in earnings and was growing rapidly, as more businesses started using 3D printing for fast prototyping and unique part manufacturing.
This acquisition is expected to further boost Proto Labs, increasing both its value and the service range.
3D Hubs may become a valuable asset for Proto Labs that will help to boost earnings, which declined significantly in recent years: e.g., in 2019, the earnings increased by only 3%. With this acquisition, Proto Labs is sure to get more with its 3D printing services, which now account for just 14.40% of its revenue.
Reason 3: Financial Performance
2020 was not a very much successful year for Proto Labs, as the number of customers significantly decreased during the lockdown. The orders for unique products decreased from 47,700 to 40,200, while the earnings fell by 5.30% YoY. Later on, however, it got much better,
with the annual operating profit margin decreasing from 17.40% to just 13.70%, and and the net profit one, from 13.80% to 11.70%.
Proto Labs has a low burden, with debt obligations of $19.40M and liquid assets of $161.60M (excluding 3D Hubs acquisition deal), as of late 2020. The company's operating cash flow decreased just a bit: from $116M to $107M, so it does not have any liquidity issues.
Proto Labs shares plunged by 21% when the management declared a somewhat conservative outlook for Q1 2021: the Q1 earnings are expected at $108M-$118M, which does not meet the market expectations. Currently, Proto Labs' EV/S, EV/EBITDA, and Forward PE are at 5.6х, 23.3х, and 66x, respectively, which is relatively high, but in line with the competition.
In case the numbers rise due to 3D Hubs acquisition, the financial indicators may become acceptable. Additionally, Benchmark raised its target price for Proto Labs stock from $165 to $235.
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