Today we have a moderately speculative idea.: take shares in industrial enterprise Proto Labs (NYSE: PRLB), in order to capitalize on the growth of orders.
Growth potential and validity: 12% behind 12 Months; 49% behind 3 of the year; 199% behind 10 years.
Why stocks can go up: there is reason to believe, that the company will be loaded with work as soon as possible, so in the future.
How do we act: we take shares now by 66,77 $.
When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.
No guarantees
Our reflections are based on the analysis of the company's business and the personal experience of our investors, but remember: not a fact, that the investment idea will work like this, as we expect. Everything, what we write, are forecasts and hypotheses, not a call to action. To rely on our reflections or not – it's up to you.
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And what is there with the author's forecasts
Research, like this and this, talk about, that the accuracy of target price predictions is low. And that's ok: there are always too many surprises on the stock exchange and accurate forecasts are rarely realized. If the situation were reversed, then funds based on computer algorithms would show results better than people, but alas, they work worse.
So we're not trying to build complex models.. The profitability forecast in the article is the author's expectations. We specify this forecast for the landmark: as with the investment idea as a whole, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.
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What the company makes money on
Proto Labs is engaged in small-scale production. We have already published an overview of the company's business, so let's not repeat ourselves.
Arguments in favor of the company
Dropped - select. The company's shares have dropped dramatically this year - by almost 74%. This is a good reason to pick them up with an eye on the influx of speculative retail investors., who will almost certainly run into these stocks.
3D-seal! This area of the company's activity does not bring it much money - 14,8% from revenue in the last quarter. But there are very few companies on the stock exchange, engaged in 3D printing. So in the eyes of the mass investor, Proto Labs is “3D printers”. Let's figure it out, why is it important.
This technology periodically becomes very popular - usually this coincides with some breakthroughs in this area at the level of individual achievements.. So it was in 2012, when magicians at home learned how to make workable firearms on 3D printers. All these events will be reflected in the shares of the respective companies. Proto Labs now has a capitalization of $1.85 billion, so pumping its quotes by a crowd of retail investors is a very likely option.
I believe in a bright future for 3D printing, but also think, that it won't come soon. So here it is better to focus on the perception of this technology as promising by the broad masses..
And now something completely different. If we forget about speculative factors, then the business environment of the company is very, very good - and as for the nearest, as well as in the long term.
Over the course of the year, Proto Labs could well be the beneficiary of the current strengthening of manufacturing performance in its main market in the US and in Europe, the second most important market.. You can also expect, that companies will actively invest in the renewal of fixed assets.
In the long term, we can expect an increase in R&D spending by various companies in order to develop their own production capacities. In this context, Proto Labs services will come in handy, because the company is engaged in small-scale production - that is, with its help, manufacturing enterprises can run in fresh solutions.
Little debt. The entire amount of the company's debts is more than covered by the money at its disposal - this is money in accounts plus debts of counterparties. Maybe, this is the reason for the lack of growth in revenue and profit: other companies are actively expanding on credit money, while Proto Labs lives on its own. This approach has its drawbacks, and the main one is the slowdown in business growth. But in the context of higher rates and more expensive loans, this is a big plus.. Investors will treat heavily indebted companies badly and look favorably on low debt companies.
Can buy. Considering all the advantages described above, the company can easily be bought by a large industrial conglomerate.
What can get in the way
Deficit. A company can fall prey to problems, tormenting other manufacturing enterprises: rising cost of logistics and raw materials. And endless pandemic reporting, of course, will not decorate - and a new large-scale quarantine can greatly spoil everything.
Price. The company's target market is approximately $ 16 billion, and she takes on it 2,81%, while she stands like 11,85% market. This could cause further volatility in these stocks.. However, the company expects, that in the coming years its market will increase to $100 billion thanks to the acquisition of the 3D Hubs platform, where companies order the production of small batches of goods to small-scale manufacturers. Consider this as an excuse for the cost of Proto Labs. But the benefits haven't materialized yet., a P / E at Proto Labs is still too big - 44,5.
What's the bottom line?
You can take shares now by 66,77 $. And then there are several options.:
- wait, when will the shares be worth 75 $. This is a very humble goal., and thinking, we will reach this level in the next 12 Months;
- keep up 100 $. Here, probably, will have to wait 3 of the year. During this time investors, probably, will see the impact of integrating Hubs into the company's operations;
- keep up 200 $ - this is just below the January historical highs of the company, who reached 211 $. It's better to focus on the deadline here 10 years, since at such distances the company can become the beneficiary of a new wave of investor interest in 3D printing.
