Can Stratasys Print Higher Prices?

With shares of Stratasys (NASDAQ:SSYS) trading around $86, is SSYS an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Stratasys provides additive manufacturing solutions for the creation of parts used in the processes of designing and manufacturing products and for the direct manufacture of end parts. The company offers desktop 3D printers and materials for idea and design development, a range of systems for rapid prototyping, and production systems for direct digital manufacturing under the uPrint, Mojo, Objet, Dimension, Fortus, and Solidscape brand. In addition, the company leases or rents 3D printers, 3D production systems, produces prototypes, and end-use parts. Its solutions are used in the aerospace, apparel, architecture, automotive, business machines products, consumer, defense, dental, electronics, educational institutions, heavy equipment, jewelry, medical, and toys industries. Creating 3D prints has been very hot in recent years, so look for companies that provide the products and services, like Stratasys, to see a surge in profits as this form of technology becomes widely accepted.

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T = Technicals on the Stock Chart are Strong

Stratasys stock has seen an explosive move higher over the last several years. The stock is now consolidating near all-time high prices so it may need some time before it gets going again. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Stratasys is trading above its rising key averages which signal neutral to bullish price action in the near-term.

SSYS

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Stratasys options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Stratasys Options

52.34%

56%

54%

What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

July Options

Flat

Average

August Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Stratasys’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Stratasys look like and more importantly, how did the markets like these numbers?

2013 Q1

2012 Q4

2012 Q3

2012 Q2

Earnings Growth (Y-O-Y)

-290.48%

-158.10%

-11.11%

-22.22%

Revenue Growth (Y-O-Y)

116.20%

63.30%

24.45%

30.73%

Earnings Reaction

2.33%

7.09%

-12.41%

-2.70%

Stratasys has seen decreasing earnings and rising revenue figures over the last four quarters. From these numbers, the markets have been optimistic about Stratasys’s recent earnings announcements.

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P = Poor Relative Performance Versus Peers and Sector

How has Stratasys stock done relative to its peers, 3D Systems (NYSE:DDD), Synaptics (NASDAQ:SYNA), Electronics for Imaging (NASDAQ:EFII), and sector?

Stratasys

3D Systems

Synaptics

Electronics for Imaging

Sector

Year-to-Date Return

7.55%

24.70%

23.49%

48.13%

22.15%

Stratasys has been a poor relative performer, year-to-date.

Conclusion

Stratasys provides innovative 3D printing products and services to companies all around the world. The stock has been on a strong move higher and is now consolidating near all-time high prices. Over the last four quarters, investors in the company have been optimistic even as earnings have decreased while revenues have increased. Relative to its peers and sector, Stratasys has been a poor year-to-date performer. WAIT AND SEE what Stratasys does this coming quarter.

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