Back to top

Image: Bigstock

Stratasys (SSYS) on Growth Trajectory: Should You Hold?

Read MoreHide Full Article

A prudent investment decision involves buying stocks that offer solid prospects and selling those that have risks. At times it is rational to hold certain stocks that have enough potential but are weighed down by tough market conditions. Here we have discussed Stratasys Ltd. (SSYS - Free Report) , a stock with an expected long-term earnings per share growth rate of 12.5% and a VGM Score of ‘A’.

Notably, Stratasys has outperformed the Zacks categorized Computer-Peripheral Equipment industry in the year-to-date (YTD) period. The stock has returned approximately 41.4% YTD, outperforming the industry’s gain of 27%.

Let’s look at the reasons for Stratasys’ solid momentum.

Driving Factors

Stratasys has been scaling new highs across all its business segments. Over the last one year, the company has inked strategic partnerships and rolled out diverse products, reflecting its solid fundamentals.

Recently, Stratasys Asia Pacific, a subsidiary of Stratasys, entered into a partnership with Ricoh New Zealand Ltd. (Ricoh New Zealand), a subsidiary of Ricoh Company, Ltd., Japan. The collaboration will cater to the demand for 3D printing solutions in the region.

We believe that the collaboration will expand and enhance Stratasys’ additive manufacturing (AM) or 3D Printing Platform. Also, this association will enable the company to attract new clients and strengthen its overall market position.

The 3D printing company also recently entered into a new three-year technical partnership with Boom Supersonic Inc. The collaboration is aimed at introducing advanced 3D printing technologies to the supersonic aerospace industry. Per Stratasys, the two companies will jointly work on bringing “commercial airline industry one step closer towards routine supersonic travel.”

The 3D printing market presents a favorable long-term investment opportunity, as a large number of engineers, designers, architects and entrepreneurs are resorting to 3D solutions for their primary designing and product modelling.

According to a recent survey by Lux Research, the 3D printed parts space will be an $8.4 billion global market by 2025, led by automotive, medical and aerospace applications. Additionally, with lower costs of 3D printing as compared with traditional manufacturing, industries are increasingly adopting the technology in their manufacturing plants.

Data from the Wohlers Report 2014 revealed that the worldwide 3D printing industry is projected to grow from $3.07 billion in 2013 to $12.8 billion by 2018, and exceed $21 billion by 2020 at a CAGR of 34%.

As the industry leader in 3D printing, is the aforementioned factors are encouraging for Stratasys, as it should enable the company to witness opportunities to grab a large share of this market. Notably, the company has entered into strategic partnerships in other spaces as well, including the auto industry with Ford Motor Co. (F - Free Report) and energy space with Schneider Electric, to exploit the growing opportunities in the 3D Printing industry.

We believe that the recent deal is a strategic move by Stratasys to expand its geographic reach and drive market penetration.

The partnership spells opportunities for Stratasys’ 3D printing business and will strengthen its base. We believe that the company’s portfolio of new and innovative products will help it in the long run to generate incremental sales.

Concerns

Nonetheless, some customers are delaying their purchases owing to current economic conditions. In the 3D printer business, majority of customers have moved toward the lower-priced uPrint, which might affect the company’s margins in the upcoming quarters. Going forward, competition from 3D Systems Corporation (DDD - Free Report) is a potent headwind.

Bottom Line

Notably, this Zacks Rank #3 (Hold) company has shown an uptrend in terms of earnings, as evident from its average positive earnings surprise of 99.4% in the trailing four quarters.

We believe that the stock still has much upside potential, which essentially filter the negatives and focus on the positives which drive price.

A Key Pick

A better-ranked stock in the broader technology sector is Applied Materials, Inc. (AMAT - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Applied Materials has a long-term expected earnings growth rate of 16.6%.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2%, respectively. 

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation. See Them Free>>

Published in