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

The increasing dependence on 3D-printed products that can be more easily modified than conventionally manufactured objects accelerated the 3D printing solutions market’s growth. The industry should keep growing with the increasing demand for customized and personalized products and rising adoption by manufacturers. According to a report by Fortune Business Insights, the global 3D printing market is expected to grow at a CAGR of 24% by 2028. Therefore, both Materialise NV (MTLS) and Stratasys Ltd. (SSYS) should benefit.

Headquartered in Leuven, Belgium, MTLS provides additive manufacturing and medical software and 3D printing services. It operates through Materialise Software; Materialise Medical; and Materialise Manufacturing segments. SSYS provides connected and polymer-based 3D printing solutions. It offers 3D printing systems, such as polyjet printers, FDM printers, stereolithography printing systems, and programmable photopolymerization printers for rapid prototyping.

SSYS has gained 5.5% year-to-date (YTD) and MTLS has lost 16.8%.  Which of these two stocks is a better buy now? 

Latest Developments

On November 15, 2021, MTLS agreed to exercise its option to acquire Link3D Inc., an additive workflow and digital manufacturing software company that supports customers in major manufacturing industries to scale and integrate their AM operations across complex supply chains and IT environments. The acquisition accelerates the creation of a materialized software platform for additive manufacturing.

On December 7, 2021, SSYS introduced the newest printer in the company’s growing portfolio of 3D printing solutions for the dental industry, the Stratasys Origin One Dental. This accelerates and bolsters the expansion of additive manufacturing offerings for dental applications.

Recent Financial Results

MTLS’ total revenue increased 28% year-over-year to €52.20 million ($59.20 million) for the fiscal third quarter ended September 30, 2021. The company’s adjusted EBITDA grew 62% year-over-year to €9.74 million ($11.05 million). At the same time, its net profit came in at €8.65 million ($9.81 million) compared to a loss of €0.28 million ($0.32 million) in the prior-year quarter. Also, its EPS came in at €0.15 compared to a loss of €0.01 in the year-ago period.

SSYS’ revenues increased 24.3% year-over-year to $159 million for the fiscal third quarter ended September 30, 2021. The company’s adjusted EBITDA grew 50% year-over-year to $7.80 million, while its non-GAAP net income came in at $0.50 million compared to a loss of $3 million in the prior-year quarter. Also, its non-GAAP EPS came in at $0.01 compared to a loss per share of $0.05 in the year-ago period.

Past and Expected Financial Performance

MTLS’ tang book value and levered FCF grew at CAGRs of 24.6% and 105.9%, respectively, over the past three years. Analysts expect MTLS’ revenue to increase 13.3% for the quarter ending March 31, 2022, and 12.2% in fiscal 2022. The company’s EPS is expected to grow 162.5% for the quarter ending March 31, 2022, and 29.4% in fiscal 2022. Moreover, its EPS is expected to grow at 63.1% per annum over the next five years.

On the other hand, SSYS’ tang book value and levered FCF grew at CAGRs of 8.3% and 32%, respectively, over the past three years. The company’s revenue is expected to increase 15.5% for the quarter ending March 31, 2022, and 10.6% in fiscal 2022. Its EPS is expected to grow 16.7% for the quarter ending March 31, 2022, and 233.3% in fiscal 2022. Also, SSYS’ EPS is expected to grow at a rate of 33% per annum over the next five years.

Profitability

SSYS’ trailing-12-month revenue is 2.60 times what MTLS generates. However, MTLS is more profitable with an EBITDA margin and net income margin of 12.25% and 3.25%, respectively, compared to SSYS’ negative returns.

Furthermore, MTLS’ ROE, ROA, and ROTC are 3.51%, 1.56%, and 1.98% compared to SSYS’ negative values.

Valuation

In terms of forward EV/S, MTLS is currently trading at 4.67x, 138.3% higher than SSYS’ 1.96x. However, SSYS’ forward EV/EBITDA ratio of 58.41x is 78.4% higher than MTLS’ 32.75x.

POWR Ratings

MTLS has an overall rating of B, which equates to a Buy in our proprietary POWR Ratings system. On the other hand, SSYS has an overall rating of C, which translates to Neutral. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

MTLS has an A grade for Growth and Sentiment, consistent with analysts’ expectations that its EPS will increase exponentially in the upcoming months. On the other hand, SSYS has a C grade for Growth and Sentiment, in sync with analysts’ expectations that its EPS will remain negative for the quarter ending March 31, 2022.

Of the eight stocks in the Technology - 3D Printing industry, MTLS is ranked first. In comparison, SSYS is ranked fourth.

Beyond what I’ve stated above, we have also rated the stocks for Value, Stability, Momentum, and Quality. Click here to view all the MTLS ratings. Also, get all the SSYS ratings here.

The Winner

The 3D printing solutions industry is expected to grow exponentially with increasing demand this year and beyond. While both MTLS and SSYS are expected to gain, I believe MTLS is currently the better investment because of its lower valuation, higher profit margin, and better growth prospects.

Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the other top-rated stocks in the Technology - 3D Printing industry here.

SSYS shares were unchanged in after-hours trading Tuesday. Year-to-date, SSYS has gained 0.73%, versus a -9.56% rise in the benchmark S&P 500 index during the same period.

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.

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