Real Money Stock Pick: Perceptron!
3-D printing has become one of the market's newest hot sectors. Shares of companies such as 3D Systems (NYSE: DDD), Stratasys (NASDAQ: SSYS), and Dassault Systèmes have soared as investors pile in, hoping that 3D printing is "the next big thing." If bullish analysts are correct, then those who jump onboard the 3D printing ship might reap large rewards in the future even if 3D printing stocks come down a little in the short term.
3D Systems and Stratasys have their own strengths and weaknesses, which I will discuss later. In this article, I would like to highlight one stock that seems to be under many investors' radars: Perceptron (NASDAQ: PRCP). I believe that Perceptron is fairly priced for its growth moving forward and an inexpensive way to ride the 3D printing wave. I believe in Perceptron so strongly that I scooped up shares of the company and would highly encourage other investors to do likewise.
What Perceptron Does
Perceptron is not primarily a 3D printing company. According to a Perceptron short seller, Jason Bond:
The company does offer some 3D scanning solutions; however, it is a small part of its business. On its website, the company calls itself as a global non-contact vision and metrology company with 30 years of experience in laser-based technology and applications. It does mention offering the Helix 3D scanning solutions...
Bond's premise is correct, but I believe his overall conclusion is not valid and is actually a good reason to buy Perceptron stock. Bond's concern is that Perceptron stock has soared too high because of investors associating the company with the 3D printing sector when it supposedly really isn't part of 3D printing. But that argument doesn't hold water either way you look at it.
If Perceptron is NOT a 3D printing company, as Bond argues, then the company doesn't have to expend much capital competing with the Goliaths of 3D Printing, and it can profit off of its own laser technologies. If Perceptron has a toehold in 3D printing (which they do via the Helix 3D scanning technology), then they can potentially be a "disruptor" company while still relying mainly on products outside the 3D printer market.
Perceptron's stock has soared after the company released a very encouraging quarterly report on Aug. 29th, 2013, and for good reason. The specific numbers (see hyperlink) show that Perceptron is growing, has very good operating margins, and has jumped to profitability after a red 2012. Fortunately, I got in to Perceptron about a month before the big jump. I still believe that Perceptron's stock has room to run due to increasing profitability and optimism for the company.
Either way one looks at it, Perceptron is a buy. If 3D printing turns out to be a bust, then Perceptron isn't adversely affected by very much. But, if 3D printing is indeed "the next big thing" then Perceptron is poised to reap the rewards and reward shareholders.
What About 3D Systems and Stratasys?
Perceptron's rise poses an important question. Are 3D Systems and Stratasys good stock picks as well? All three stocks have produced jaw-dropping gains over the last year, with Perceptron leading the pack by far.
Fellow Motley Fool contributor Ben Kovalick highlights some of the strengths of all three companies:
3D Systems and Stratasys have a distinct advantage over Perceptron. They have created a large moat around themselves that allows for them to set competitive prices and patents on materials. These patents are especially important for 3D because it allows them to create a printer that can't be replicated.
Stratasys, with their recent merger with Objet, has become the largest 3D company and has expanded their technology even further. With Objet on board Stratasys can now offer functional prototypes and production parts, as well as develop faster printers with finer details and smoother surfaces.
Perceptron has passed the daunting task of not only getting into the 3D marketplace but also of coming up with another potential disruptive technology...Developing a name for yourself and a successful track record can lead to success like 3D and Stratasys have seen.
Overall, I like what 3D Systems and Stratasys have to offer quite a bit. Stratasys is the larger company of the two and seems to have a "leg up" on 3D Systems. I am concerned, however, about the current valuations of both 3D Systems and Stratasys. The share prices of both companies have been bid up quite highly due to the 3D printing craze. Unlike Perceptron, these two companies have nothing else to fall back on if 3D printing becomes a bust.
Perceptron also offers a yearly dividend, while both 3D Systems and Stratasys currently do not. Due to exceedingly frothy investor euphoria over 3D printing, I foresee a short pullback for both 3D Systems and Stratasys stock in the near future because impatient investors will probably sell out when they don't get their desired results as quickly as they wish. In the grand scheme of things, however, I believe that all three companies discussed in this article are great long-term holds. Perceptron offers a more stable and much more inexpensive option than 3D Systems and Stratasys.