"I just read about a new 3D printing company that more than doubled on its IPO. Is it a good investment? What do you think of it relative to its competitors?"
First of all, it is important to note that, because Voxeljet AG is a company with less than $1.0 billion in revenues (as of December 31, 2013), the company qualifies as an “emerging growth company”. This means that they don’t have to fully comply with the Sarbanes-Oxley Act nor do they have to present more than 2 years of audited financial statements. To put things in perspective, the company had $11,486,000 in revenues last year, and is currently valued at $187,200,000. The company’s revenues grew 52% from 2010 to 2011 and 20% from 2011 to 2012. Not impressive considering 3D Systems (DDD) (the largest player in the industry) returned 44% from 2010 to 2011 and 53% from 2011 to 2012. This shows shrinking revenue growth over the periods for Voxeljet, and growing revenue growth for 3D Systems. Compared to most other 3D printer manufacturers, Voxeljet’s printers are extremely expensive, creating a long sales cycle due to internal assessments by customers before making a purchase. While most other 3D printer manufacturers (3D Systems, Stratasys, Z Corporation) seem to be focusing on “how do I create a product that will be most useful to my customers”, Voxeljet seems to steer itself towards “how do I build a machine that will look most impressive on paper”. I may be missing something, but there doesn’t seem to be much there that differentiates Voxeljet’s printers from those of the rest of the industry other than printer size and speed (two attributes that are relatively easy to replicate; especially for the firms with more resources). This is an industry that is growing quickly, both in the share of the economy as well as the number of 3D printing companies. Voxeljet, due to the aforementioned long sales cycle, will not experience explosive revenue growth. If I were a purchasing manager for an automotive firm, I wouldn’t be itching to buy a capital-intensive, unproven machine from a relatively new company. Their financial data from the first 6 months of this year (Jan 1st to June 20th, 2013) reflects this, showing a ~3.5% decline in revenue versus the same period in 2012.
On top of this, I generally don’t see IPOs as a good investment idea due to 1. The nature of an IPO and 2. The uncertainty of IPOs. If you are a private company owner, and you believe that your company is on track to double profits every year for the next 5 years, are you going to take the company public right now? Definitely not, because the company will be worth much more in 5 years when growth is slowing and outlook is not that great. That is when companies have their IPO, after a great run and their owners want to cash in on the company’s growth. 900,000 of the 6,500,000 shares sold for the IPO were from previous owners cashing out their position.
I apologize if this analysis sounds overly pessimistic and biased towards the “DEFINITELY DON’T BUY” side, but I am generally skeptical of IPOs – especially ones that are so small that they are able to get past the reporting standards of larger companies (limiting what we can see), and long sales cycles (generally a catalyst for Enron-style mark-to-market accounting practices that inflate revenues in the short-term).
If you want to get into the 3D printer industry, go for one of the companies that had their IPO at least 3 years ago. I like DDD and SSYS for these reasons. These two companies capture 7.7% and 5.6% of the 3D printer manufacturing market share, respectively, and have more stable revenues, broader product offerings, and (perhaps most importantly), relatively realistic valuations.
I am generally interested investing if 2 criteria are met: 1. I like the stock (quantitative/valuation based – Is the company worth what they are asking for it?) and 2. I like the company (qualitative based – Would I want to own this company?). For example, I LOVE Tesla (TSLA) as a company, but the valuation is so outlandish that I sent my professor a 4-page report (including graphics) on how ridiculous the company’s valuation is. I am neither interested in Voxeljet’s stock nor its business. Take a step back, watch the stock take a dive sometime over the next 2 years (like almost every single 3D IPO), then buy it cheap.
On top of this, I generally don’t see IPOs as a good investment idea due to 1. The nature of an IPO and 2. The uncertainty of IPOs. If you are a private company owner, and you believe that your company is on track to double profits every year for the next 5 years, are you going to take the company public right now? Definitely not, because the company will be worth much more in 5 years when growth is slowing and outlook is not that great. That is when companies have their IPO, after a great run and their owners want to cash in on the company’s growth. 900,000 of the 6,500,000 shares sold for the IPO were from previous owners cashing out their position.
I apologize if this analysis sounds overly pessimistic and biased towards the “DEFINITELY DON’T BUY” side, but I am generally skeptical of IPOs – especially ones that are so small that they are able to get past the reporting standards of larger companies (limiting what we can see), and long sales cycles (generally a catalyst for Enron-style mark-to-market accounting practices that inflate revenues in the short-term).
If you want to get into the 3D printer industry, go for one of the companies that had their IPO at least 3 years ago. I like DDD and SSYS for these reasons. These two companies capture 7.7% and 5.6% of the 3D printer manufacturing market share, respectively, and have more stable revenues, broader product offerings, and (perhaps most importantly), relatively realistic valuations.
I am generally interested investing if 2 criteria are met: 1. I like the stock (quantitative/valuation based – Is the company worth what they are asking for it?) and 2. I like the company (qualitative based – Would I want to own this company?). For example, I LOVE Tesla (TSLA) as a company, but the valuation is so outlandish that I sent my professor a 4-page report (including graphics) on how ridiculous the company’s valuation is. I am neither interested in Voxeljet’s stock nor its business. Take a step back, watch the stock take a dive sometime over the next 2 years (like almost every single 3D IPO), then buy it cheap.
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