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3D Systems: Revolutionary, but Also Overbought

Ever wanted a robot like Rosie from The Jetsons that can cook up a hot meal for you on demand? Well that’s not science fiction anymore thanks to the wonders of 3D-printing — and my favorite invention of the last year, Burritobot.

While there’s still plenty of kinks to work out, the basic concept is pretty simple: You tell the machine how much salsa, guacamole and sour cream you want in your burrito and it “prints” you the meal on demand to your specifications.

Amazed? Well, get used to it. This is how manufacturing will be done in the 21st century.

Similar devices are out there that do much more sophisticated jobs, including creating precision-tooled parts and electronics. And one of the fastest-growing stocks on Wall Street — 3D Systems (NYSE:DDD) — is your best way to play this high-tech manufacturing trend.

3D Systems provides complex gadgets that can manufacture objects using plastics, lasers and other components instead of just plain old ink. Clients include carmakers like Ford (NYSE:F), toy companies like Hasbro (NASDAQ:HAS) and aerospace companies like Northrop Grumman (NYSE:NOC). (Check out a full list of 3D clients here.)

You can understand the appeal, and investors love this story. Shares are up 60% in the past six months and 260% in the last year! Unfortunately, I think it’s a little late to get in if you haven’t bought already. The forward P/E is now pushing 40 — and while enthusiasm could be justified, I think the stock is overbought.

It’s also worth noting that earnings growth rates have begun to slow despite red-hot sales expansion. While a 20% EPS jump year-over-year is nothing to sneeze at — especially during the current earnings malaise on Wall Street — it raises red flags about momentum.

Equally troublesome: More than 13 million shares — 40% of available stock — are held short. Sure, that could fuel a short squeeze … but it’s worth noting that the bears are watching this stock, too.

That said, while I strongly advocate protecting any profits you’ve already made, I would be reluctant to sell out completely. 3D Systems has been aggressively expanding and investing in new gadgets that will keep it at the front of this fast-growing industry. There also are few competitors as of yet, with small-cap Stratasys (NASDAQ:SSYS) perhaps the only other publicly traded company that focuses mainly on 3D printing.

Just beware of unrealistic expectations and don’t get greedy. It’s clear that we are living in an automated world, and companies like DDD will be paving the way in the future.

But whether this company has a bright future and whether the stock is overbought are two different questions. So my advice is to watch 3D Systems carefully, and only buy on a dip after this recent crazy run.

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Jeff Reeves is the editor of and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.

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