Is The ExOne Stock A Buy?

The ExOne Company (NASDAQ:XONE) is an industrial 3D printing company. It builds machines capable of handling more complex designs and complicated parts than a home 3D printer. It does so using binder jetting technology, which saw high adoption when supply chain issues arose in 2020.

Many analysts long believed additive manufacturing is the future of industry and that invites the question is The ExOne stock a Buy?

COVID-19 accelerated this evolution. Investment bank B. Riley more than quadrupled its price target on the company following a pre-announcement that it beat Wall Street earnings estimates.

The ExOne may be a leader in binder jetting manufacturing, but it’s not alone. The industry is growing rapidly as more companies flood in after seeing the successes of The ExOne and its rivals when demand spiked for its products during worldwide shutdowns.

Let’s run the specs to see if ExOne Company will build investor portfolios with new layers or profitability or if it will melt down their stakes.

The ExOne Is An Industrial Level 3D Printer Company

The ExOne is a 3D printer manufacturer that works on an industrial level. The company is an early leader in binder jetting technology, which is the fastest and most accurate method of printing metal, ceramics, and more.

In binder jetting, the industrial printhead exudes a liquid binding agent onto a thin layer of powder. This powder could be sand, metal, ceramic, or composites. Many of these materials require little to no post-processing, which lowers the production costs.

The company can also optimize designs over the course of multiple builds to reduce dimensional tolerance. It also avoids the need for a build plate, supports, and even the heat used in traditional 3D printing.

This makes it a strong play in the 3D printing industry, as it provides a scalable solution for enterprise. Additive manufacturing is expected to grow to a $22 billion market size by 2022, and that has investors salivating at the opportunity to buy early.

Is The ExOne Stock A Buy?

The ExOne still hasn’t turned a profit, and its most recent earnings report shows negative $13 million in earnings and  negative $14 million in free cash flow.

Of course, it did earn revenue of $11.10 million in the second fiscal quarter of 2020 for a total of about $50 million in annual sales.

This means that it’s trading for over 21x its trailing sales and that keeps some analysts from rating it a Buy.

However, the company’s price target was raised, despite it not being upgraded to a Buy. But the company improved its outlook by announcing several incoming sales, along with a partnership with Canadian company Rapidia to produce a “complete metal 3D printing system.”

This new technology, called the ExOne Metal Designlab and X1F advanced furnace. It’s meant to further revolutionize the industry, and the announcement sent share prices soaring, despite not having any sales yet to justify it.

And that brings up the inherent risks to this investment.

Is The ExOne Balance Sheet Sturdy?

Although it did great during the pandemic, the growth of 3D printing hitherto had been slow. And The ExOne still isn’t profitable yet, though the company is burning through cash. It has $49.4 million in liquidity, but this is from fundraising more than sales.

Some companies are struggling to survive in light of supply chain constraints from shutdowns, and the costs of upgrading to new industrial equipment could be too rich for some.

And the company has a relatively high overhead of over 20 percent. It lowered fixed overhead costs improve its financial statements, but that will need to be further boosted over the next decade to improve sustainability.

Still, growing interest in its core business of binder jetting technology could increase sales. Headwinds from the fallout of COVID-19 could continue improving the company’s outlook through at least the next year.

A new White House administration and Democratic control of Congress could create change though. A push is happening toward American manufacturing, and additive manufacturing will be a key growth factor in this aspect.

Of course, there will be heavier competition moving forward.

How Stiff Is 3D Printing Competition?

Although it’s one of the first, ExOne is not the only 3D printing business in the industry. Companies like Voxeljet, Desktop Metal (DM), and Stratasys (SSYS) are deeply embedded in the additive manufacturing industry. Each of these companies is aiming to eat away at the company’s market share.

In addition, some smaller parts require other technologies. Dental, jewelry, and other businesses use Formlabs Form 3 resin printer for their applications. Because it’s still growing, 3D printing could go any direction, like Blu Ray vs HDDVD or VHS vs Betamax.

There’s no telling which technology or company will ultimately win out. Contracts with big businesses and government will ultimately decide this.

Is The ExOne Stock A Buy? The Bottom Line

The ExOne Company is a 3D printer manufacturer that works on an industrial scale. Its binder jetting technology uses powder and a binding agent to create more precise printing of more complex designs than possible with metal extruding machines.

The domino effects of the pandemic accelerated the race to additive manufacturing. And a new government administration wants to bring more manufacturing stateside. These factors will contribute to continued growth in the industry.

But there’s no guarantee that The ExOne will be the company to benefit from this growth. Its technology isn’t proprietary, and more companies are building similar machines with highly-engineered solutions. As the industry grows, it’s anybody’s bet who will be the ultimate winner.

Still, 3D printing is a growing industry, and investors looking to get in could pick a worse horse to back. 

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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.