Materialise vs. 3D Systems: Which 3D Printing Stock is a Better Buy?

Materialise NV (MTLS), and 3D Systems Corporation (DDD) are two prominent players in the 3D printing industry. Leuven, Belgium-based MTLS provides additive manufacturing and medical software and 3D printing services internationally. Its solutions enable healthcare, automotive, aerospace, art and design, and consumer goods industries to build 3D printing applications. In comparison, DDD in Rock Hill, S.C., provides 3D printing solutions that include 3D printers, print materials, software, on-demand manufacturing services, and digital design tools. The company serves the healthcare, aerospace, automotive, and durable goods industries.

Over the past few years, rapid digitalization and impressive technological advancements have increased the demand for 3D printing, also known as additive manufacturing technology. Its cost-efficient and quick creation and development of 3D prototypes in various shapes and sizes to study models before proceeding to full-scale production has gained rising popularity in industries that include healthcare, automotive, aerospace, art and design, and consumer goods.

Increasing corporate investments and product breakthroughs in this industry should keep driving the industry’s growth. The global 3D printing market is expected to grow at a 24.1% CAGR to $57.10 billion by 2027. So, both DDD and MTLS should benefit.

But which of these stocks is a better pick now? Let’s find out.

Latest Developments

On Nov. 15, 2021, DDD introduced high-throughput 3D printing technologies, a new partnership to provide industry-leading post-processing, improved additive manufacturing (AM) software, and a new production-grade photopolymer to enhance customer success and catalyze industries. By combining the expertise of its Application Innovation Group (AIG), DDD will help customers defy limitations to advance AM performance and productivity in healthcare and industrial markets.

On Dec. 7, 2021, MTLS licensed Siemens AG’s (SIEGY) Parasolid software for integration with MTLS’ industry-leading software Magics. This move should  enable MTLS to add native CAD workflows within Magics 26, providing an additional toolset on top of mesh functionality. This powerful combination of trusted solutions will allow users to prepare for additive manufacturing processes, improve productivity and provide optimal workflow in the 3D printing industry.

Recent Financial Results

DDD’s revenue for its fiscal 2021 third quarter, ended Sept. 30, 2021, increased 14.6% year-over-year to $156.10 million. The company’s non-GAAP gross profit came in at $64.70 million, up 9.8% from the prior-year period. Its non-GAAP net income was $10 million for the quarter, versus a $4.10 million net loss in the year-ago period. DDD’s non-GAAP was $0.08, compared to a $0.03 loss in the prior-year period. The company had $502.75 million in cash and equivalents as of Sept. 30, 2021.

For its fiscal 2021 third quarter, ended Sept. 30, 2021, MTLS’ revenue increased 26.7% year-over-year to $60.44 million. The company’s gross profit came in at $35.98 million for the quarter, up 32.4% from the prior-year period. Its operating profit was $5.25 million, indicating a 2132.8% rise from the year-ago period. MTLS’ net income was  $10.02 for the quarter, versus a $429,000 net loss in the year-ago period. Its EPS was $0.17, compared to a $0.01 loss per share in the prior-year period. The company had $194.95 million in cash and equivalents as of Sept. 30, 2021.

Past and Expected Financial Performance

DDD’s EBITDA and total assets have increased at CAGRs of 2.1% and 7.4%, respectively, over the past three years. The company’s revenue has fallen at 2.3% CAGR over the past three years.

Analysts expect DDD’s EPS to rise 463.6% year-over-year in its fiscal year 2021, ended Dec. 31, 2021, and decline 45% in fiscal 2022. Its revenue is expected to grow 9.3% year-over-year in fiscal 2021 and decline 5.8% in fiscal 2022. And the company’s EPS is expected to increase at a 30% rate per annum over the next five years.

In comparison, MTLS’ EBITDA and total assets have grown at CAGRs of 2.4% and 9.9%, respectively, over the past three years. The company’s revenue has grown at 2.4% CAGR over the past three years.

MTLS’ EPS is expected to grow 241.7% year-over-year in its fiscal year 2021, ended Dec. 31, 2021, and 29.4% in fiscal 2022. Its revenue is expected to grow 10.1% year-over-year in fiscal 2021 and 12.2% in fiscal 2022. Analysts expect the company’s EPS to increase at a 63.1% rate per annum over the next five years.

Valuation

In terms of forward EV/Sales, MTLS is currently trading at 4.85x, which is 59.5% higher than DDD’s 3.04x. And in terms of trailing-12-month Price/Book, DDD’s 3.05x compares with MTLS’ 4.60x.

Profitability

DDD’s trailing-12-month revenue is almost 2.8 times MTLS’. However, MTLS is more profitable, with a 4.7% EBIT margin versus DDD’s negative value.

Furthermore, MTLS’ ROA and ROTC of 1.6% and 2%, respectively, compare favorably with DDD’s negative values.

POWR Ratings

While MTLS has an overall B grade, which translates to Buy in our proprietary POWR Ratings system, DDD has an overall C grade, which equates to a Neutral. The POWR Ratings are calculated by considering 118 distinct factors, each weighted to an optimal degree.

MTLS has a B grade for Value, which is in sync with its lower-than-industry valuations. MTLS has a 1.07x non-GAAP forward PEG, which is 31.7% lower than the 1.56x industry average. DDD’s C grade for Value reflects its slightly higher-than-industry overvaluations. DDD’s 26.45x forward EV/EBITDA is 77.3% higher than the 14.92x industry average.

In terms of Sentiment, MTLS has been graded a B, which is consistent with analysts’ higher estimates regarding its revenue growth. MTLS’ revenue is expected to be $256.44 million for its fiscal 2022, ending Dec. 31, 2022, representing a 12.2% rise from the prior-year period. However, DDD’s D grade for Sentiment is in sync with analysts’ lower revenue estimates. The company’s revenue is expected to decline 5.8% from the prior-year period to $573.49 million for fiscal 2022, ending Dec. 31, 2022.

Among the eight stocks in the Technology - 3D Printing industry, MTLS is ranked #1, DDD is ranked #2.

Beyond what we have stated above, our POWR Ratings system has also rated MTLS and DDD for Growth, Quality, Momentum, and Stability. Get all MTLS ratings here. Also, click here to see the additional POWR Ratings for DDD.

The Winner

Both DDD and MTLS should benefit from the growing interest and substantial investments in the rapidly growing 3D printing industry. However, we think better analyst sentiment and higher profitability make MTLS a better buy here.

Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to access the top-rated stocks in the technology - 3D Printing industry.

DDD shares were trading at $18.11 per share on Wednesday afternoon, down $0.13 (-0.71%). Year-to-date, DDD has declined -15.92%, versus a -3.94% rise in the benchmark S&P 500 index during the same period.

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.

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