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For whatever reason, the 3D system (NYSE:DDD)
There is a lot of concern about the possibility that goodwill may be debited and bankrupt.
One issue makes no sense to the valuation of the stock, and the other is that it is very unlikely given the current financial situation.
The important issue is the new competitive threat and the compression of profits, which reduces the valuation multiples of the industry to a more normal level.
Over the past year, 3D systems have collapsed from irrational highs reached in the past.
The current stock price is $31, and now it is only $3.
5 billion. investors need to ignore goodwill and fear of bankruptcy and pay attention to competition for the following reasons.
Goodwill impairment lluminati Investments emphasizes that the 3D system will charge an impairment fee for the huge goodwill balance on the balance sheet.
In the pop-up Stratasys (NASDAQ:SSYS)
Write down $100 million from MakerBot acquisition.
It is suggested that any write-down will adversely affect the valuation of the 3D system.
Investors first need to understand the concept of goodwill and why it exists on the balance sheet.
More importantly, why this is not important for investors.
According to investment Encyclopedia, the definition of goodwill is as follows: 3D Systems established a considerable goodwill position of $0. 515 billion at the end of the third quarter, due to a large number of acquisition records and doubts.
The main reason that goodwill impairment charges are not important to investors is that they are not
Most markets have never considered cash charges based on intangible assets.
Most investors evaluate the 3D system based on the sales price or multiples of the income price.
Fast-growing companies rarely value based on book value, so any blow to assets that reduce Book value is rarely important.
Not to mention, most investors have removed goodwill assets from any book value calculation, especially those accumulated from acquisitions.
According to the Illuminati, considering that the goodwill amount of $0. 515 billion at the end of the third quarter accounted for 40% of the book value of $1, any write-down would adversely affect the stock. 3 billion.
Of course, a write-down of $0. 25 billion will reduce the book value to $1.
5 billion, but most investors have assumed that goodwill is actually worthless and that book value is close to $0. 8 billion.
AtonRa Partners, who had no chance of bankruptcy a few days ago, wrote about the risk of bankruptcy in the 3D system.
Even seeing headlines about the risk of bankruptcy in this stock is surprising because the company is still very profitable and has a operating profit margin of more than 10%.
One just needs to look at the bankruptcy of the recent radiowack company (OTCPK:RSHCQ)
See how difficult it is to actually accomplish this feat without involving fraud.
Before finally giving in to this financial result, RadioShack has struggled for years.
There are non-3D Systems
In 80 million, GAAP net income could be around $2014.
There are few signs that companies are about to face bankruptcy risks.
The theory of that article is that HP's arrivalPackard (NYSE:HPQ)
Entering the industry with other competitors may push operating profit margins down to breakeven or lower.
With this initiative, the 3D system will increase capital expenditures and rapidly consume existing cash.
By the end of the third quarter, the company was about $0. 377 billion, and recently completed the Cimatron transaction for $97 million.
Now, based on the fourth-quarter cash flow and access to a $0. 28 billion credit line, 3D Systems's net cash is about $0. 15 billion.
The missing detail in this story is that given the 3D system's position in the field of 3D printers, it is easy to get equity financing.
Although any requirement or scenario for a stock issue would result in a reduction in the price of the stock, whether bankruptcy or not.
The real problem is Hewlett.
Packard has brought more competitive pressure to further drive down profit margins.
Compared with 2014, the 3D system is expected to release lower EPS in 2013.
Operating profit margins fell to 11.
8% in Q3 from 19.
The previous year was 3%.
The reason for the decline in profit margins is that before HP's upcoming competition, the operating costs of increasing R & D and sales efforts are higher.
If any, the 3D system could increase its profit margin to 2016, according to HP's threat.
After my article in the field of 3D printers, anyone who pays attention to me knows from the phone call in early 2014 that multiples of corporate value income are critical to valuation stories.
At present, the transaction income of 3D system is only 5 times the tracking income, and the estimated income is 2015.
This number has collapsed from an astonishing level in early 2014.
These more standardized levels of 3D Systems and Stratasys make these two stocks more interesting.
EV by revenue (NYSE:TTM)
DATA Goodwill and bankruptcy issues at Ychartstakestake have no impact on the 3D system.
Investors will not assess the 3D system based on inflated book values including $0. 515 billion in goodwill, and bankruptcy is not a risk for a profitable company.
There may be so many situations in the next few years that stocks will be crushed without the risk of bankruptcy.
The problem is HP's competitive threat, which requires a higher level of fees.
Although on February 26, before the market opened, when the 3D system was reported, a huge goodwill fee might impact the 3D system in the first place, assuming it holds 52- weekly low of $27.
Disclosure: The author does not hold any positions in any of the stocks mentioned, and does not have a plan to start any positions within the next 72 hours.
The author wrote this article himself and expressed his views.
The author was not compensated (
In addition to Seeking Alpha).
The author has no business relationship with any company mentioned in this article.
Additional disclosure: The information contained herein is for reference only.
Nothing in this article should be considered as an invitation to buy or sell securities.
Before you buy or sell any stock, you should do your own research, draw your own conclusions, or consult a financial advisor.
Investment includes risk, including loss of principal.