As technology continues to advance, innovations are commonplace in our day-to-day lives. This exciting prospect is promising in terms of growth for society overall. The rapid development of technology has many people excited to jump into investing in novel opportunities like solar panels, electric cars, and the latest iPhone. One ideology that has sparked recent interest is 3D printing. This advancement has received copious amounts of attention from the industry, as well as investors. This enthusiasm has caused many to consider the trade a spearhead that symbolizes the future of manufacturing. However, it may not be quite as lucrative or as revolutionary as many of the industry vanguards would have you believe. In fact, the success of 3D printing continues to shrivel in comparison to the rapid growth and profitability of CNC machining.
Targeting the Issue
The idea of 3D printing has escalated and become a popular concept that investors tend to associate with a “futuristic” form of production.
However, one must delve into the actual numbers of this industry to comprehend what is taking place behind the scenes. More importantly, one must be able to look past the bells and whistles of 3D printing and lay their focus on the hard, objective numbers.
Suspicious Figures
Investors tend to pride themselves in their numbers. Some individuals may argue that they have done their research and brushed up on the latest financial statements. However, the displayed numbers are not what they seem to project. The hype associated with 3D printing may cause one to invest excessively in the industry. For this reason, Leading Edge Industrial prompts you to look into the long-term expectations of 3D printing. We can look at the industry’s performance in 2012 and 2013 to better understand what overvaluation can do. In 2013, analysts found the industry for 3D printing products and services to have grown to an abundant $3.07 billion. That means that there was a 34.9% growth rate from 2012 to 2013. During this time period, stocks within the 3D printing industry were driven up to sky-high values that the industry itself could not keep up with. This caused the value of stock to drop drastically, leaving investors scrambling in terms of ROI.
Key members of the 3D printing industry, like 3D Systems and Stratasys, have been striving to gain back their footing. Since 2015, this industry has been working on developing revenue and increasing profits. This is all due to the fact that there has been a decrease in demand for 3D printing products and services spanning the entire country. All of these struggles seem unlikely, especially due to the numbers that these companies are reporting back to investors. For example, one such company, Proto Labs, reported $88.1 million in the third quarter of 2017. That’s 12.7 percent more than their third quarter of 2016. Proto Labs also estimated a 20% projected average annual EPS growth for the upcoming five years. Sound too good to be true? We thought so too, so we did a little digging.
Unveiling the Truth
After delving deeper into the industry we came up with some interesting artifacts. The 3D printing industry’s key players have a unique strategy for achieving such amiable numbers. This makes them look better than they actually are. Surprising, right? Well, when your company specializes in a specific technology it is your job to make it look good.
You may ask yourself, how do we know? Leading Edge Industrial’s sister division, CEI Tech LLC, has come across the source of these figures. CEI Tech LLC receives machining jobs from projects originally submitted to Proto Labs. When looking into the details of Proto Labs’ report, one can see that the source of the growth is due to CNC machining and injection molding. That means that the numbers many believe to represent the growing 3D printing industry are not entirely based off of this sector.
This specific situation can especially misconstrue your perspective of the industry due to the fact that Proto Labs is one of the top companies working with 3D printing. It’s logical to believe they would yield the most promising figures, isn’t it? Unfortunately, this is not true. For a company that markets 3D printing, it sure does paint a misleading image. Proto Labs delivers approximately 87.91% of its work from other industries. With this revelation in mind, it’s crucial to identify what it is exactly that is replacing 3D printing. Even with its “promising” ~13.5% growth in adjusted revenue within a six month period, 3D printing is no match for CNC machining. The industry itself knows this! By outsourcing jobs to CNC machining, CNC machining was contributing to the contending industry’s 24.7% increase in revenue, during that same 6-month interval. By not including CNC work within their financial reports, 3D printing is robbing CNC of its credit and lying to investors.
Educate and Engage
For this reason, Leading Edge Industrial prompts you to fully engage yourselves in understanding the numbers behind each of your investments. In certain situations, like the 3D printing industry, returns from investments may not be as promising as they appear. This can cause you to invest blindly and lose out on profits that you may have gained from industries like CNC machining. Clearly, the 3D printing industry has resorted to the best option possible. You should do the same. We believe your money is much better spent on cost-effective, capable, CNC machining equipment made for jobs that actually exist today, rather than a for a device that makes cool trinkets. That’s right, we went there.
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Sources:
https://www.fool.com/investing/2018/01/23/3-things-to-watch-when-this-top-performing-3d-prin.aspx
https://www.fool.com/investing/2017/05/01/the-best-3d-printing-stock-to-buy-in-2017.aspx
Image: https://pixabay.com/en/business-paper-office-finance-3239669/