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Stratasys (SSYS) Trending Up: Time to Add to Your Portfolio?

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Stratasys Ltd. (SSYS - Free Report) is well set on the growth trajectory, gathering momentum from its positive earnings surprise history and strong fundamentals. Also, shares of the company have been trending upward, yielding a positive year-to-date return.

An impressive track record of beating quarterly earnings expectations, along with an encouraging fiscal 2016 outlook and solid cash flow are driving the upside.

On Mar 3, Stratasys posted better-than-expected fourth-quarter 2015 results. The company’s fourth-quarter adjusted loss per share (excluding amortization, impairment and other one-time items but including stock-based compensation) was 18 cents, significantly narrower than the Zacks Consensus Estimate of a loss of 24 cents.

Though Stratasys’ revenues plunged 20.2% year over year to $173.4 million, the figure surpassed the Zacks Consensus Estimate of $165 million.

The company exited the quarter with cash and cash equivalents and short-term bank deposits of $258.2 million, compared with $304.4 million in the previous quarter. The company does not have any long-term debt. This enables it to pursue strategic acquisitions and invest in growth initiatives.

Going forward, for fiscal 2016, the company anticipates revenues in the range of $700 million to $730 million (mid-point $715 million), much above the Zacks Consensus Estimate of $708 million. Non-GAAP income per share is projected between 17 cents and 43 cents. Currently, the Zacks Consensus Estimate is a loss of 20 cents.

It is worth mentioning here that Stratasys’ sustained efforts on turning around the dismal performance of MakerBot have been encouraging. After announcing its restructuring plans in April last year, which included 20% job cuts, MakerBot is now trying to accelerate the adoption of 3D technology by raising awareness. In this regard, in July, the company decided to make the MakerBot Replicator Mini Compact 3D Printer available in all of the 600+ Sam’s Club stores across the country. Earlier, they were available in a few select Sam’s Club stores only. These initiatives reflect MakerBot’s strategy to increase the accessibility of desktop 3D printing for retail shoppers, which in turn can accelerate its adoption. We believe that these initiatives will drive the company’s performance over the long run.

Furthermore, the company’s focus on the 3D printing market presents a favorable long-term opportunity. Data from Wohlers Report 2014 revealed that the worldwide 3D printing industry is expected to grow from $3.07 billion in revenues in 2013 to $12.8 billion by 2018, and exceed $21 billion in worldwide revenues by 2020, with a CAGR of 34%. Moreover, pent-up demand for 3D printing products is expected from the automotive consumer products, government and defense, industrial/business machines, education research, and others (arts and architecture) segments. Additionally, TechNavio forecasted the global 3D Printer market to grow at a CAGR of 45% (2014–2019). Being the 3D printing industry leader, these trends bode well for Stratasys and indicate strong growth prospects, going ahead.

However, competition from 3D Systems Corporation (DDD - Free Report) persists as a potent headwind.

Currently, Stratasys sports a Zacks Rank #1 (Strong Buy).

A couple of other stocks in the technology sector that also sport a Zacks Rank #1 are Lexmark International Inc. and Paylocity Holding Corporation (PCTY - Free Report) .

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