In the world of 3D printing and additive manufacturing, Nano Dimension (NASDAQ:NNDM) often flies under the radar, though it’s a company that has been pioneering 3D-printed electronics, especially with its flagship DragonFly LDM system.
In spite of its promising technology, though, Nano Dimension has had a volatile ride in the stock market, hitting highs of $21 in 2018 to lows under a $1 per share in 2020. So, is Nano Dimension stock undervalued?
Revenues Are Soaring On All Timeframes
For Q2 2023, Nano Dimension reported revenues of $14.7 million, a 32.8% increase from the same quarter in the previous year. While these numbers are modest, the growth rate itself is encouraging, especially considering the highly specialized market the company serves.
It’s worth noting that FY 2022 revenues are up 315% compared to the year prior, coming in at $43.6 million versus $10.5 million in 2021.
The quarter-over-quarter and annual momentum swings to the upside are not yet translating to share price gains with NNDM share price up just 11% for the year versus 12.9% for the S&P 500.
It should be highlight that NNDM is very much a play on share price appreciation as opposed to income. It doesn’t offer a dividend at this time, and isn’t likely to anytime soon. Expect management to deploy revenues back into R&D and further reinvestment as opposed to payouts to shareholders.
Margins Hint At A Promising Future
The company’s gross margin stands at 42.8% as of Q2 2023, a figure that offers promise to shareholders if the company can scale revenues further. Once the technology matures and gains wider acceptance, margins are expected to improve.
And make no mistake about it, the company must do so to overcome wildly negative operating income of $246 million, an increase from $206 million the year prior.
That in turn is translating to negative earnings-per-share of $0.88, a real concern for a company trading at under $3 per share. It represents a wider EPS loss year over year from -$0.81 the year prior, making a P/E ratio inapplicable.
What the company does have in its favor, in spite of the cash burn, is $685 million in cash and $346 million in short-term investments. That suggests ample fire power in reserves to address the high burn rate.
The Price-to-Sales (P/S) ratio stands at an elevated 12.1x, higher than the industry average, which potentially could be a red flag for value investors. While the P/S ratio is certainly high, it is somewhat justified by the company’s rapid growth and market potential.
Is NNMD Stock Undervalued?
Only one analyst covers NNMD stock and has an exceptionally high $20 price target on the firm.
Rather than give that single analyst much weight, we ran a discounted cash flow forecast analysis (DCF) and arrived at a fair market value of $3.69, suggesting shares could rise by as much as 42.9%.
An argument in favor of undervaluation is that management has been aggressively buying back shares. When those in the know start buying in earnest, it suggests good news may be on the horizon.
Is NNMD A Good Stock to Buy Now?
The company’s promising technology and high growth rates are counterbalanced by highly negative operating income and EPS figures.
It’s worth noting that Nano Dimension has a strong balance sheet with no debt and cash reserves of around $1.1 billion as of Q2 2023. This financial stability provides it with the cushion to invest in growth opportunities and perhaps even make strategic acquisitions.
For those bullish on the future of 3D printing technology, Nano Dimension has demonstrated rapid revenue growth in the past few years, and is trading at a significant discount to fair market value according to a DCF calculation.
The numbers paint a complex picture, but for those willing to weather volatility for long-term growth, Nano Dimension could be a lucrative investment
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.