Proto Labs: "Real parts, Real Fast"

04/05/2016 8:00 am EST

Focus: STOCKS

Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

When companies need a prototype part or a small production run and don’t want to spend the time and money it would take to set up a production line, they turn to this company, explains Mike Cintolo, editor of Cabot Top Ten Trader.

Proto Labs (PRLB) specializes in putting its expertise in 3D printing, CNC machining and injection molding to turn out custom prototypes in as little as one day.

The company’s motto is “Real Parts, Really Fast,” and its speed and accuracy have made it a favorite for its broad and diversified customer base.

Product developers who use 3D software for design are common customers, as Proto’s services can produce physical iterations during a product’s development process that speed things along.

Proto Labs’ combination of technological expertise, customer experience and eight global manufacturing facilities creates a strong barrier to entry, too.

This has led to 35% compound annual growth in revenue and 50% growth in adjusted net income since 2009.

In 2013, we remarked that 3D printing might represent a challenge to its leadership in the fast prototyping business. What actually happened is that Proto smoothly integrated the new technology into its business model.

PRLB had a great year in 2013, ripping from $28 in late October 2012 to $90 in November 2013.

But the stock made only one new high after that (a brief spike to $94 in June 2014) while trading generally sideways and down.

After dropping to $52 in early February, PRLB caught fire after a great 4th quarter earnings report and gapped up again on March 4th.

There’s still some resistance to get past, but high-volume buying during its latest rally likely reflects institutional buying.

We think the stock is buyable on its breakout above $78. A stop in the high $60s makes sense.

Subscribe to Cabot Top Ten Trader here…

By Mike Cintolo, Editor of Cabot Top Ten Trader.

 

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