Proto Labs Is A Strong Play In Next-Generation Manufacturing (NYSE:PRLB)

The manufacturing industry has been heavily impacted by COVID-19. Traditional manufacturing has been particularly hard hit as a result of production and supply chain disruptions. Next-generation manufacturer Proto Labs, however, has fared far better in the current environment.

Proto Labs (PRLB) is at the forefront of numerous emerging manufacturing sectors like digital manufacturing, 3D printing and CNC machining. The company’s presence in newer manufacturing segments has made it far more adaptable in COVID-19 landscape. Proto Labs is increasingly well-positioned to become a dominant force in the future manufacturing landscape.

Proto Labs’ valuation is starting to reach all-time highs despite COVID-19.

Data by YCharts

Source: YCharts

Leading Digital Manufacturing

Proto Labs continues to lead the rapidly growing digital manufacturing industry. The company is successfully capitalizing on digital technologies like e-commerce to expand its market. What’s more, Proto Labs’ digital manufacturing model is far more resilient in the current environment as it is less impacted by social distancing measures.

Proto Labs 2.0 should further cement Proto Labs as a leader in industry 4.0. Proto Labs 2.0 is expected to bolster the company’s e-commerce platform and backend systems. The company’s efforts to improve its overall infrastructure should allow it to come out of the pandemic in a far better position than traditional manufacturers.

As the world continues to digitize, Proto Labs will be in a prime position to cater to customer needs. Proto Labs’ growing digital platform and highly versatile manufacturing technology should allow the company to adapt to a rapidly changing landscape far better than its competitors.

Successfully Capitalizing on Disruptive Technologies

Proto Labs is involved in some of the most promising manufacturing technologies. The company’s investments into 3D printing, in particular, sets it apart from the vast majority of other manufacturing companies. Moreover, other 3D printing companies like Stratasys (SSYS) and 3D Systems (DDD) are struggling just to stay afloat.

Proto Labs is one of the few manufacturing companies that is successfully leveraging emerging manufacturing technologies. Proto Labs could end up taking even more market share during the pandemic as a result of the company’s adaptability.

Proto Labs’ digital manufacturing model has become particularly effective during the pandemic. The company has already demonstrated an ability to rapidly produce medical supplies and other coronavirus-related products.

While Proto Labs Q2 revenue of $106.6 million decreased 8.1% Y/Y, the company is still faring relatively well in the current environment. Proto Labs also reported a net income of $12.6 million, which is impressive considering the fact that many of its major competitors are still unprofitable.

Proto Labs innovative approach to manufacturing has allowed the company to be more adaptable during the coronavirus.

Source: Proto Labs

Challenges Remain

Proto Labs still faces an incredibly challenging macroeconomic environment. With no end in sight for COVID-19, Proto Labs will likely continue to face demand and workforce disruptions. Although Proto Labs is better equipped than most manufacturers to handle COVID-19, the company is still feeling the negative impacts of the pandemic.

Proto Labs involvement in 3D printing does not come without its risks either. The 3D printing business has proven to be incredibly tough despite its rosy long-term outlook. Even 3D printing pure plays like Stratasys and 3D Systems have seen their valuations plummet over the past few years. While Proto Labs has found success in 3D printing, the company will still have to be wary of rapid changes occurring in this emerging segment.

3D printing has proven to be an incredibly tough industry. Major 3D printing companies have seen their valuations collapse over the past half-decade.

Conclusion

Proto Labs is one of the few manufacturers successfully capitalizing on emerging digital and cloud technologies. The company is also at the forefront of some of the most promising manufacturing trends. Proto Labs still has far more room to grow at its current market capitalization of $3.9 billion.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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