3D Printing Investor
As many investors know, CAN-SLIM is the mnemonic for a screen of
high growth stocks that was developed by William J. O'Neil,
successful investor, entrepreneur, and founder of
Investor Business Daily
. O'Neil began using his CAN-SLIM methodology in 1953, and the
approach is generally regarded as one of the most effective screens
for finding high growth stocks that will lead their sector and
trade to higher highs. CAN-SLIM is a tried and true screen for
early stage high growth stocks like those we see in the 3D printing
space with companies like 3D Systems (
), Stratasys (
), ExOne (
), and Arcam Ab (
). These companies are on the cutting edge of what many believe
will be a technological and societal leap forward over the next
Putting that aside for a moment, CAN-SLIM was developed with the
goal of finding stocks
they make major moves, and the 3D printing stocks as a group have
had a tremendous run over the last 12-18 months. This raises the
question, can a company's stock that meets the CAN-SLIM screen and
had a significant run continue to rise? History proves the answer
is yes, and the stock may continue to rise precipitously over a
period of years if it remains an innovative leader in a high-growth
sector during a period of economic stability.
With that in mind, I thought I'd filter 3D Systems Corp. through
the 7 screens in the mnemonic to see where the company currently
stands, (despite its recent gains) and this is what I found.
. Per share, current earnings should be up to 25% vs. the same
quarter in the previous year. Additionally, it is a positive
prognostic sign if earnings are accelerating in recent
3D Systems' core operational, non-GAAP* .21 EPS in the first
quarter of 2013 was an increase of 23.5% from the first quarter of
2012 which came in at .17. Moreover, progressive EPS of .27, .32,
and finally .39 during the remainder of 2012 demonstrate EPS growth
that accelerated throughout the year. DDD missed the acceleration
in progressive EPS in the fourth quarter of 2012 as compared to the
first quarter of 2013 in part due to share dilution and exposure to
foreign exchange risk.
Analysts on average
are expecting second quarter EPS of .24, which, if 3D Systems meets
or beats, would show that EPS growth is once again
which should be up 25% or more in each of the last three
Here, 3D Systems has knocked it out of the park:
Non-GAAP EPS for 2010 = .48 (up from a mere .05 for 2009)
Non-GAAP EPS for 2011 = .81 (69% increase over 2010)
Non-GAAP EPS for 2012 = $1.25 (54% increase from 2011)
3D Systems' annual earnings growth speaks loud and clear, and
explain why its lofty PE multiple is justified from the perspective
of DDD bulls.
New product or service
, more specifically a product or service that fuels earnings
growth for the "C" and "A" above. This
allows the company's stock to break out of prior ranges and
eventually to new highs. This is partly what propelled Apple,
America Online, Amazon.com, eBay, and other high-fliers over the
last two decades, and it is what should help drive 3D Systems'
stock higher over time.
Speaking personally, I don't know of any "new product or
service" that will be as game-changing to our personal lives, and
the world as a whole ten years from now as 3D printing. I know
there are some who claim 3D printing is a fad, it's over-hyped, it
won't be adopted by the general public, and so-on, but there were
also plenty of doubters when the personal computer was in its
infancy, and cell phones were the size of a shoe box. I believe the
doubters of 3D printing in general and 3D Systems' role in its
future will be proven wrong also.
A good indicator of the size and strength of the personal and
small business 3D printer market will take place at the end of next
month, when Staples begins selling the Cube 3D Printer by 3D
Systems in their stores.
If online sales (already underway) and initial store sales are
strong, then look for DDD and the rest of the 3D printing stocks to
rally (again) as the imagination of the public and appetite for the
Incidentally, 3D Systems appears to already be selling the Cube on
China's largest B2C web site,
Bottom line: Never underestimate the potential of the "New"
factor of a company like 3D Systems.
Supply and demand
. A stock's demand can be seen by the trading volume of the stock
during price increases and decreases. Investing basics tell us
that a rising stock price
along with rising volume
indicates demand for shares outpacing supply, and conversely, a
drop in share price on high volume shows investors are heading
for the exits. The Money Flow Index ((
)) is useful here as a trend of averaged stock price
volume changes together over time. I won't go into the
calculation specifics of the MFI, but if it consistently runs
between 30-80, then it's a picture that says "follow the
In DDD's case, the MFI has ranged in that sweet spot of 30-80
for almost all of the last 6 months. This is helpful in clearing up
the supply/demand picture for DDD because while there have been
some large volume spikes on days the stock fell precipitously
during January and February, there were equally high volume spikes
on share price advances in May. While the stock has traded in a
broad range from $27/share to $52/share over the last 6 months, the
MFI tells us that there has been, on average, more buying pressure
than selling pressure, and (can I say "printing"?), the "S" very
nicely in CAN-SLIM.
Leader or laggard?
Buying a strongly trading stock in a leading industry keeps the
focus on strength, not weakness, and helps separate winners from
losers. This measurement can be seen in the Relative Price
Strength Rating ((RS)) of the stock. The RS (not to be confused
with the RSI) is a measurement of stock performance over a
defined period (usually one year) in comparison to the rest of
Here again, DDD outperforms. The stock's relative strength
compared to all companies in the
Investor's Business Daily
database (available by subscription) comes in at a whopping 96,
meaning DDD outperformed 96% of the stocks screened. That's
strength. That's printing a titanium "L" down for "Leader" in the
which (unsurprisingly) looks at mutual funds, insurance
companies, credit unions, banks, and other large players buying
the stock. Institutional sponsorship should be increasing in the
most recent two quarters, and not trailing off.
In this case, 3D Systems is a mixed bag. Institutional ownership
numbers tend to vary somewhat depending on the source, but each of
the sources I researched reported institutional sponsorship growth
in the last quarter of 2012, with institutions as net sellers
(approximately 3M shares) in the first quarter of 2013.
Most recent quarter
Institutional Share Purchases
Institutional Shares Sold
Net Institutional Shares Purchased
Change in Ownership
I give 3D Systems a small "i" here and will wait to see what the
institutional sponsorship is in the next quarter. If it continues
to decline, it could be cause for measured concern.
, particularly the Dow Jones, S&P 500, and NASDAQ. This part
of the mnemonic is based on market timing and trends. The goal is
to invest in stocks that meet the above "CAN-SLI" criteria while
there is an uptrend in the Dow Jones, S&P 500 and NASDAQ. The
theory (based on historic trends) is that the stocks of good
companies outperform in a rising market. In a declining market
and souring economy, institutions as well as individuals leave
high growth/high tech companies to buy defensive stocks such as
utilities, consumer staples, and healthcare.
In a rising market as we're currently experiencing, a
high-growth cyclical company like 3D Systems historically
outperforms. It may sound trite to say "the trend is your friend,"
but it is still true nonetheless.
My conclusion is that 3D Systems Inc. currently meets all of the
CAN-SLIM screening methodology with an asterisk for institutional
sponsorship. While the recent gains in the share price of 3D
Systems Corporation have been significant, I believe that trend
will continue as 3D printing goes mainstream over the next decade
and changes our lives in ways we are only beginning to imagine.
* The use of GAAP vs. non-GAAP earnings has been a subject of
intense debate for many years and goes beyond the scope of this
article. I have chosen to utilize non-GAAP numbers for this article
because it gives investors a more accurate interpretation of the
historic and potential future organic growth of 3D Systems' core
I have no positions in any stocks mentioned, and no plans to
initiate any positions within the next 72 hours. I wrote this
article myself, and it expresses my own opinions. I am not
receiving compensation for it. I have no business relationship with
any company whose stock is mentioned in this article.
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