This article looks at the comparison of margins and profitability between 3D Systems (DDD) and Stratasys (SSYS).
Both 3D Systems and Stratasys are leaders and early disruptors in the additive manufacturing space.
They offer innovative 3D printing solutions which cover not only the hardware part such as 3D printers but also the software ecosystem that usually tags along with the printers.
The investment thesis that revolves around 3D Systems and Stratasys is the lucrative razor and blades business model which offers stable and long-term recurring revenue.
In this aspect, the razor is the printer while the blades will be the proprietary consumables that can only be provided by the respective company.
Therefore, 3D Systems and Stratasys operate in a highly lucrative industry.
Should the business take off, the share price will absolutely soar beyond the moon.
Without further delay, let’s head out to the following topics!
Total Revenue And Net Sales
Let’s first check out the total revenue comparison for both companies.
As seen in the chart, 3D Systems’ total revenue is slightly higher than that of Stratasys.
As of fiscal 3Q 2021, 3D Systems’ total revenue reached $637 million while Stratasys’ total revenue came in at a lower figure of $583 million on a TTM basis.
A trend worth mentioning is that 3D Systems’ revenue has recovered at a much faster pace than that of Stratasys after emerging from the COVID headwinds in fiscal 2020.
Nonetheless, both companies’ revenues were adversely impacted as seen in the declining TTM revenue in fiscal 2020 when the COVID-19 pandemic just started out.
While both companies had been impacted, 3D Systems seems to be emerging from the pandemic in a much better shape than Stratasys when its sales were considerably higher in fiscal 2021.
This reason alone may have driven 3D Systems’ market cap to nearly twice as much as that of Stratasys as of Dec 2021.
Gross Profit Margin
In terms of gross profit margin, both 3D Systems and Stratasys are having nearly the same level of profitability.
However, Stratasys used to have a much higher gross margin in fiscal 2019, notably at nearly 50%.
Over the years, Stratasys’ gross profit margin has slowly declined and came in at 43% as of fiscal 3Q 2021, which was about the same as that of 3D Systems.
While both companies’ gross margins have declined since fiscal 2019, driven primarily by the adverse impact of the COVID-19 pandemic, Stratasys’ gross margin seems to have declined more compared to 3D Systems.
As a result, the gross profit margins of both Stratasys and 3D Systems were at the same levels throughout fiscal 2021.
Operating Profit Margin
Again, Stratasys’ operating profit margin also has been worse off compared to that of 3D Systems in most of the results seen in the chart above.
In fiscal 2020, Stratasys’ operating profit margin plunged to as low as -90% before recovering to -11% in fiscal 3Q 2021.
On the flipped side, 3D Systems’ operating profit margin has been in much better shape and averages around -10% since fiscal 2019.
As of fiscal 3Q 2021, 3D Systems’ operating margin clocked at -4.5%, one of the best results the company has ever reported.
Net Profit Margin
Similarly, 3D Systems’ net profit margin also has been much better than that of Stratasys in the last 3 years.
As of Q3 2021, 3D Systems’ net profit margin totaled nearly 50% on a TTM basis while Stratasys’ figure came in at -8%.
At these figures, 3D Systems was making money while Stratasys was incurring losses.
While 3D Systems’ net profit margin soared dramatically in fiscal 3Q 2021, the gain was primarily due to the sales of several assets, including the firm’s subsidiaries, in the same quarter.
Therefore, this particular gain in net income for 3D Systems was a one-time deal and would not be recurring in the future.
Another trend worth pointing out is that Stratasys’ net profit margin was much worse than that of 3D Systems during fiscal 2020 when the COVID-19 headwinds began to affect both companies in the same fiscal year.
Despite experiencing the same COVID-19 impact, 3D Systems’ profitability seems to be more resilient compared to that of Stratasys, illustrating that 3D Systems probably operates more effectively than Stratasys.
Adjusted EBITDA Margin
The adjusted EBITDA margin is computed by the respective companies.
Therefore, they may not be comparable on an apple-to-apple basis due to the different methods of adjustment.
Nevertheless, according to the chart, 3D Systems’ adjusted EBITDA margin has been much higher than that of Stratasys in most of the quarters.
Moreover, 3D Systems’ adjusted EBITDA margin also has recovered at a much better rate than Stratasys since fiscal 2020.
As of 3Q 2021, 3D Systems’ adjusted EBITDA margin reached slightly above 12% compared to only 5% for Stratasys.
Again, the higher adjusted EBITDA margin for 3D Systems indicates that the company may operate much more efficiently than Stratasys.
Operating Cash Flow Margin
From a cash flow perspective, Stratasys seems to be having an edge as seen in the higher operating cash flow margin for the company.
Stratasys’ higher operating cash flow margin indicates that the company generates much better operating cash flow than 3D Systems.
While Stratasys has been taking the lead since fiscal 2020, 3D Systems’ result seems to have surpassed that of Stratasys in fiscal 3Q 2021.
In the latest quarter in 2021, 3D Systems’ operating cash flow margin came in at 12% while Stratasys’ figure was slightly lower at 10%.
Despite having a higher operating cash flow margin for 3D Systems, I still think Stratasys generates much better cash flow due to its historical results and the growing margin since fiscal 2019.
On the flipped side, 3D Systems’ operating cash flow margin has been unpredictable and the results slipped significantly in fiscal 2020, probably due to the adverse impact of the COVID-19 pandemic.
Keep in mind that the result for 3D Systems in 3Q 2021 does not include the cash flow that comes from sales of assets.
Free Cash Flow Margin
Free cash flow is the difference between operating cash flow and capital expenditures.
Capital expenditures include only the cash spent on purchases of properties and equipment and exclude cash inflow from sales of assets such as business subsidiaries.
That said, according to the chart, 3D Systems seems to have a much better free cash flow margin.
That said, 3D Systems’ figure reported in Q3 2021 was twice the number of Stratasys.
However, on a historical basis, Stratasys’ free cash flow margin has been steady and growing and this trend indicates that Stratasys may generate much better free cash flow on a long-term basis.
On the other hand, 3D Systems’ free cash flow margin has been zig-zagging and the results were specifically worrying in fiscal 2020 when it dived to record lows.
Despite having only a 4% free cash flow margin in Q3 2021, Stratasys’ figures have been improving steadily over the years.
More importantly, Stratasys’ free cash flow margin did not deteriorate as badly as that of 3D Systems during the age of the COVID outbreak in fiscal 2020.
From a profitability perspective, 3D Systems wins hands down.
This is evident from all the higher profitability margins for 3D Systems.
Specifically, 3D Systems’ EBITDA margin beat Stratasys by a wide margin in most quarters.
The difference was even more profound in Q3 2021 in which 3D Systems’ EBITDA margin was more than double the figure of Stratasys.
On the other hand, Stratasys leads in cash flow generations.
While 3D Systems generates considerably higher cash flow margins in the latest quarter, Stratasys’ cash flow margin has been rather stable and is seeing a steady rise over the years for both operating cash flow and free cash flow.
However, the market does not seem to appreciate Stratasys’ strong cash flow generation over the years.
As a result, 3D Systems’ market cap has been valued at nearly twice the market cap of Stratasys all these years.
Credits and References
1. All financial figures in this article were obtained and referenced from financial filings available in the following location:
Other Statistics For Your Reference
The content in this article is for informational purposes only and is neither a recommendation nor a piece of financial advice to purchase a stock.
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