Proto Labs (PRLB) has established itself as the world’s largest manufacturer of custom parts for prototyping and short term production. Servicing client’s needs across injection molding, computer controlled machining and 3D printing, the company has achieved its leading position due to a reputation for quality and speed. As an example the company’s molding services, once provided with a 3D CAD model, can provide a prototype within 1 day to 2 weeks compared to the industry standard of 4-12 weeks.
The company reported 13.9% growth over the past year across all business units while adjusted EPS grew 16% to $0.51 and beat guidance that was in the range of $0.42 to $0.48 and consensus forecasts of $0.45.
With a benign outlook the industry prospects appear bright. In particular 3D printing is only in its infancy and as costs drop and quality improves the demand for services is expected to accelerate. The company estimated a few years ago, after surveying developers, that its total addressable market was $7bn. Since then the growth of 3D printing has been considerable and continues to provide a strong tail wind. PRLB is the leading service provider but with revenues in 2016 of only $300 million it still has plenty of room to grow.
The advantage of the business model is that PRLB can leverage growth in the industry without being dependent on or owning any particular technology. Rather the company can reduce its risk by continually adopting the best technology available and focus on providing a service.
PRLB is well placed to benefit from the shift and with earnings growth forecasts of 20% looking reasonable the 20 times multiple of current year forecasts looks very affordable.
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