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FARO Technologies : Beyond 3D Printing Stocks

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The hype surrounding 3D printing stocks like 3D Systems Corporation (DDD), ExOne Co (XONE) and Voxeljet AG (VJET) may have caused their shares to peak at the end of last year but small cap 3D measurement stock FARO Technologies, Inc (FARO) has largely avoided a run up and accompanied pullback despite being an important component of the 3D revolution.

The hype surrounding 3D printing stocks like 3D Systems Corporation (NYSE: DDD), ExOne Co (NASDAQ: XONE) and Voxeljet AG (NYSE:VJET) may have caused their shares to peak at the end of last year but small cap 3D measurement stock FARO Technologies, Inc (NASDAQ:FARO) has largely avoided a run up and accompanied pullback despite being an important component of the 3D revolution.

What is FARO Technologies, Inc

Small cap FARO Technologies calls itself the world’s most trusted source for 3D measurement technology as the company develops and markets computer-aided measurement and imaging devices and software. More specifically, technology from FARO Technologies permits high-precision 3D measurement, imaging and comparison of parts and compound structures within production and quality assurance processes. The devices are used for inspecting components and assemblies, production planning, documenting large volume spaces or structures in 3D, surveying and construction, as well as for investigation and reconstruction of accident sites or crime scenes. Approximately 15,000 customers are operating more than 30,000 installations of FARO Technologies' systems, worldwide.

As for 3D printer stocks, 3D Systems Corporation provides advanced and comprehensive 3D design-to-manufacturing solutions including 3D printers, print materials and cloud sourced custom parts; ExOne Coprovides 3D printing machines and printed products to industrial customers; and Germany based Voxeljet AG offers 3D printers and operates a 3D printing service center for on-demand production of metal-casting moulds and models.

What You Need to Know or Be Warned About FARO Technologies

Back in late October, FARO Technologies reported a 20.6% third quarter sales increase to $82.2 million and a 122.6% net income increase to $6.2 million, or $0.64 per share, from $5.0 million, or $0.29 per share, in the third quarter of 2013. New order bookings for the third quarter increased $13.7 million, or 21.8%, to $77.0 million. The CEO stated:

"FARO performed very well in the third quarter.  We produced strong top line growth with solid margins and operating earnings, while continuing to invest in new product development, expansion of our sales organization and IT systems infrastructure.  Our sales growth was driven by continued strength in laser scanning and meaningful growth in the arm product line with the release of the new laser line probe.  In this quarter, we also acquired The CAD Zone, which we expect will accelerate our penetration in the law enforcement forensic technologies market – keeping in mind the market is still in the early stages of development. We expect our revenue for 2014 will be consistent with our targeted longer term organic growth model of mid-teens annual revenue growth.  In total, the third quarter was very strong for the Company."

At the end of July, FARO Technologies announced it had acquired The CAD Zone, Inc, a leading software provider in the law enforcement accident and crime scene reconstruction market who’s point cloud software application will be integrated with FARO's laser scanning technology to provide turnkey solutions for crime scene and other forensic applications.

FARO Technologies also reported second quarter earnings when revenue increased 20.1% to $82.1 million, net income increased 74.3% to $6.3 million and new bookings increased 25.7% to $83.9 million. The CEO stated:

"FARO's strong product line-up combined with solid execution by the global team enabled the Company to accelerate sales growth and new order intake in the second quarter. As a result, we also delivered a $0.15, or 71%, increase in EPS for our shareholders through higher sales, improved manufacturing efficiencies, and greater leverage on our cost structure." 

Otherwise, FARO Technologies has a trailing P/E of 31.41, a forward P/E of 27.91 and no dividend according to Yahoo! Finance data.

Share Performance: FARO Technologies vs. DDD, XONE & VJET

On Friday, small cap FARO Technologies rose 0.31% to $55.54 (FARO has a 52 week trading range of $39.75 to $60.91 a share) for a market cap of $959.44 million plus the stock is down 4.7% since the start of the year, up 3.29% over the past year and up 201.4% over the past five years. Here is a look at the long term performance of small cap FARO Technologies and then its performance verses that of 3D Systems Corporation, ExOne Co and Voxeljet AG:

As you can see from the above performance chart, good market timing could have made traders a bundle on 3D Systems Corporation while FARO Technologies is once again bumping at a $60 price ceiling.

The Bottom Line. With double or even triple digit increases in revenue, new order bookings and net income over the past couple of quarters, investors may want to take a closer look at small cap FARO Technologies.