Stratasys Inc. - Aggressive Growth

Stratasys, Inc (SSYS) had a recent earnings surprise that spurred another round of upward estimate revisions, pushing shares to a Zacks #1 Rank (Strong Buy).

The company should see impressive growth over the next few years, both organically and through the new acquisition.

Company Description

Stratasys makes additive manufacturing machines for prototyping and producing plastic parts.

Record-Setting Quarter

On May 4 Stratasys announced a record high $34.3 million in revenue for the first quarter. This was up 23% from $28.0 million a year ago. Management said they are seeing positive trends in demand for their products and much of the growth is in their high-margin products.

Net income went from a slight loss a year ago to $5.0 million this period. That works out to $0.20 per share, topping the consensus estimate by 3 cents, marking the third earnings surprise in a row.

Big Growth Rates

After analysts went through the earnings release they went ahead and raised full-year expectations for this year and next year. The 2011 Zacks Consensus Estimate is up a dime to $0.92. In 2012 analysts expected $1.21 per share, up 15 cents. These levels represent expected growth rates of 57% and 31%, respectively.

New Acquisitions

Stratasys spent $38 million to buy Solidscape, a 3D printer company that caters to the jewelry, medical/dental and industrial markets. The company had revenues just over $13 million last year.

Valuations

On the surface, shares look pretty pricey at these levels. The forward P/E is in the 40’s and even with a 19% annual growth rate the PEG is north of 2. But, given the size of the company, these can be a bit misleading. The price to sales is showing a bargain at 0.4 times.

The Chart

Even though analysts were raising estimates on the earnings surprise, investors were selling shares of SSYS like it was going out of style. So, if you can stomach some risk, you might be getting quite a bargain here.

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