The Proto Labs stock is being kissed awake after the numbers.

Last Updated: 8. November 2023By

Shares of Proto Labs, the contract manufacturer, have been on the rise recently after the release of their financial results. The stock has gained nearly 40% since the end of October. Although the price surge is considerable, the share is still far away from its all-time high ($251, reached on 27th January 2021).

Proto Labs – no longer a start-up Proto Labs was founded in 1999 by Larry Lukis, a successful businessman and computer enthusiast. His goal was to revolutionize the production of plastic prototypes by automating the traditional manufacturing process through the development of complex software that could communicate with a network of milling machines and injection molding presses. He connected the machines to exchange data. The result was impressive – plastic and metal parts could be produced in a fraction of the time previously required.

In the following ten years, the company further developed its injection molding capabilities, introduced an Express process for CNC machining, and opened production facilities in Europe and Japan. In 2014, Proto Labs introduced industrial-grade 3D printing services to facilitate the product development process for designers, engineers, and fabricators, from the first prototypes to small-scale production.

Specialist for small-scale production Today, the US-based company has specialized in accepting orders for prototypes and small-scale production. The orders come in digitally and are processed extremely quickly. The customer receives an automated cost estimate for the production within minutes. After the order is placed, plastic and metal prototypes are ready in a few days, sometimes even within 24 hours. Instead of customers having to wait weeks for a prototype, Proto Labs is lightning fast.

Used across industries The key to the company’s success is its software for order processing and its speed of delivery. Proto Labs itself employs around 2,600 people and serves completely different industries. The analysts address sustainable growth potential in the market.

Proto Labs back on the growth path After a growth slump in the previous quarters, Proto Labs is back on the path of success: revenues in the third quarter increased by 7.4% to $130.7 million. This exceeded analysts‘ expectations by $7.94 million (source: Seeking Alpha).

Around 80% of the revenues were generated in the US and the rest in Europe. The small Japan business was discontinued in the fourth quarter of last year. The development in the individual regions was very different: while revenues in the US increased by 5%, revenues in Europe rose by 24.7%.

Net income for the third quarter of 2023 was $0.51 per share. This was 28.3% above the level of the previous year’s quarter and 21 cents above the estimates of Wall Street analysts.

A look behind the scenes Proto Labs reports revenues in four market segments: injection molding, CNC machining, 3D printing, and sheet metal: injection molding accounted for around 40% of the company’s total sales (US$51.7 million) and showed a year-over-year revenue growth of 4%. In the CNC machining segment, currency-adjusted sales rose 10% to US$52.9 million, while the sheet metal segment shrank 18% to US$4.3 million. In the future market with 3D printing, revenues, on the other hand, rose 7% to US$21.6 million, thus accounting for 16.5% of total sales.

Conclusion: The total market capitalization is around USD 820 million, the price-earnings ratio for this year is based on the current analyst estimates (source: Seekingalpha) 23, the price-sales ratio is 1.65. The balance sheet is solid: the company is debt-free and sitting on a cash pile of US$114.9 million. Investors seem to be pleased with the return to the growth path, as evidenced by the strong share price surge in recent days.