2023-06-02 07:34:08
Contrarian investing would have made a lot of money in shares of AM companies. Investors in 3D print indices have lost about three to four times as much as investors in the Euro Stoxx 50. For investors in AM companies that went public via a SPAC, the losses are even higher. A signal to established players in the manufacturing industry that opportunities are emerging in the AM industry to enter additive manufacturing?
You can read these – and other – conclusions in a new report from AMPower, the German consultancy firm. This time they made an analysis of AM companies that are listed on the stock exchange. Have they delivered returns to their investors? All in all, they put fifteen listed companies from the AM industry against the financial yardstick.
Were investors in AM industry not too eager?
Higher ratings for newcomers
An interesting conclusion is that investors value established players in the market lower than new entrants. To make it concrete: the Chinese Bright Laser Technology had a Price to Sale ratio of 17.6 at the end of 2022; Nano Dimension of 13.52; Velo3D from 4.09. Here are the ratings of Stratasys, 1.21, 3D Systems, 1.8, and Materialize. 2.05, stark against it. The analysts attribute this to the low growth these companies have shown in recent years compared to the overall growth of the AM market. Still, the question naturally arises whether investors who have been too enthusiastic about their valuations in companies such as Desktop Metal, Markforged, Shapeways and Velo3D. These three companies, which have gone public in recent years, saw their share price drop 72%, 76%, 84% and 76% respectively last year.
BLT: high ratings
AMPower then compares the financial developments of the 15 companies with those of the peer group, companies with similar activities, so as not to compare a manufacturer with a 3D printing service agency. This shows, for example, that 3D Systems’ revenue growth is slower than the peer group average: 12.6% in 2022 (versus 20.6% peer group) and 10.5% in 2021 (versus 13.7 for the rest ). In contrast, Bright Laser Technologies, one of the Chinese players to successfully go public, grew much faster than the peer group average: 35.3% in 2021. The company had a market capitalization of $2.39 billion at the end of 2022, compared to 3D Systems’ market capitalization of $0.98 billion.
Promises not fulfilled
The exaggerated valuations for companies in the AM industry are perhaps best reflected in the numbers of companies such as Desktop Metal, Markforged and Shapeways. The latter, the 3D printing service agency with a production location in Eindhoven, saw turnover shrink by 1.4% last year, while the peer group saw turnover increase by 11.2%. Of the $86 million in 2022 revenue forecast at the time of the IPO, only $32.2 million was realized. Markforged is another example of how promises can work out: at its peak, the company had a market value of $950 million. At the end of 2022, a quarter of that was left: $220 million. Markforged also sees turnover growth less quickly than the peer group.
Desktop Metal and Velo3D
That does not apply to Desktop Metal. The AM company that now wants to merge with Stratasys had a turnover growth of 582% in 2021 and 86% last year. AMPower does point to the large share in this growth of acquired companies such as ExOne and Envisiontec. According to AMPower, the biggest challenge for Desktop Metal is getting liquidity under control (which was denied during the analyst call). Last year, $250 million went out of cash to cover operating costs. $430 million remained from the peak in market capitalization of $5.26 billion at the end of last year. Velo3D doesn’t seem to be doing too badly among all these newcomers. In 2022, it managed to almost double its turnover, much more than the peer group. In terms of valuation, however, the group has also had to lose: from $ 1.87 billion at the peak to a value of $ 330 million at the end of 2022.
The acquisition opportunities for those who have capital
AMPower also pays attention to two listed companies that disappeared from the stock exchange during the reporting period. In principle, SLM Solutions has done well as an independent company. In 2022, turnover grew twice as fast as that of the peer group, no less than 40%. On the other hand, it constantly needed cash to pay for operational costs. And that, according to AMPower, a company is an attractive prey for a buyer, who came to SLM Solutions with Nikon that bought the German company. The German consultants are brief about Fast Radius. The digital manufacturing company went bankrupt nine months after going public. SyBridge bought the assets for $15.9 million. At the IPO, Fast Radius raised $445 million in cash. Enough for 9 months apparently.
Additive manufacturing as a production technology will not go away. In terms of valuations, the companies are back to earth. Is that an entry point for established manufacturers in the manufacturing industry, such as Nikon? The valuations in the AM sector allow it. To start a stable growth path after a solid consolidation of the market.
You can download the entire report download from AMPower
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