An Investor’s

Report 3D SYSTEMS

THE EXONE COMPANY

ABOORVA SUNDAR

DEGREE: Business/Law –majoring in Finance

CAREER ASPRIATIONS: Family Law Barrister

Holding company founded in 1986 by Chuck Hull

Market leader

Growing customer base

Incorporate stereolithography, selective laser sintering, colour-jet printing, fused deposition modelling, multi-jet printing and direct metal sintering technologies in its processes.

3D SYSTEMS (DDD)

Founded in 2005

Provides printing machines, printed products, material and other services to industrial customers on a global scale.

They also supply associated materials, including consumables, replacement parts, and technical support that is necessary for their consumers.

XONE’s ability to print products from a variety of desirable materials is one of their key competitive advantages.

THE EXONE COMPANY (XONE)

Third quarter results are below expectations

Company shares fell by 16.6 percent

Revenue forcast fell from $700-740million to $650-

690million

Missed Wall Street earnings targets for the last 6 consecutive

quarters

These figures have been blamed on 3D Systems decision to

invest heavily on increasing the capacity of a metal printer

maker Phoneix Systems which it acquired in July 2013.

3D Systems inability to reach sales goals and the

delayed availability of some of its consumer products

are also attributable reasons for the fall in their

results.

3D SYSTEMS (DDD)

Their reported revenue of $11.20million for the quarter is well

below the analysts’ consensus estimate of $12.11million .

Reported $0.32 earnings per share for the quarter is $0.18

below analysts estimates.

However their stocks saw unusually large options

trading activity, with investors purchasing 2,084 put

options on the company which is an approximately

250% increase compared to the average volume of

596 put options.

THE EXONE COMPANY (XONE)

HAMEEDA ANWAR

DEGREE: Business/Law –majoring in Finance

CAREER ASPIRATIONS: Banking Law

RESIDUAL INCOME MODEL

Calculations based on forecasting EPS and ROE – derived in

the Balance Sheet and Profit & Loss statement

Less potential errors compared to FCF model

This model can be better estimate the value of the firm when

the industry is unpredictable

MODEL: EARNINGS BASED MODEL

Market forecasts EPS for the first 3 years based on the

highest EPS given by the NASDAQ- closest to near future

values/more reliable than our figures

Beyond this;

12% in EPS based on ExOnes future historical trends

3% growth in EPS for 3D systems

APPLICATION

2014-2020 2020 seems to set a reasonable projected horizon, based on the industry’s expected growth (set at 2018-2121)

4D printing on the horizon?

HORIZON FORECAST

EXONE

-1.8

-1.6

-1.4

-1.2

-1

-0.8

-0.6

-0.4

-0.2

0

0.2

0.4

2013 2014 2015 2016 2017 2018 2019 2020

PV of Residual Income

PV of Residual Income (Residual

Income * Discount Factor )

EPS as per the NASDAQ for 2013- 2016

EPS growth at 12% thereafter

Constant BETA of 0.71 (NASDAQ)

Constant Re: 0.05763 (assumed no growth) -

difficult to assert in the volatile technological/

electronics market

ASSUMPTIONS

TOTAL VALUE:

MARKET VALUE:

RECOMMENDATION: not to buy – seemingly overinflated price in

the market IN THE CURRENT PERIOD

EXONE VALUATION

ExOne Vo

Growth 0% B=0.71 12.20038

B= 1.02 ( Avg tech/electronics

industry) 7.079217

Growth 3% B= 0.71 16.57677

B= 0.5 17.78179

SENSITIVITY ANALYSIS

3DSYSTEMS

-1.5

-1

-0.5

0

0.5

1

2013 2014 2015 2016 2017 2018 2019 2020

PV of Residual Income

PV of Residual Income (Residual Income *

Discount Factor )

EPS as per the NASDAQ for 2013- 2016

EPS growth at 3% thereafter

Constant BETA of 1.4 (NASDAQ)

Constant Re: 0.09213 (assume no growth)-

difficult to assert in the volatile technological/

electronics market

ASSUMPTIONS

3DSYSTEMS VALUATION

TOTAL VALUE:

MARKET VALUE:

RECOMMENDATION: not to buy – seemingly overinflated price in

the market IN THE CURRENT PERIOD

3D systems Vo

Growth 0% B=1.4 19.67411

B=1.02 (avg tech industry ) 23.34406

Growth 3% B=1.4 24.63899

B=0.5 31.21335

B=2.00 growth 5% 20.89057

SENSITIVITY ANALYSIS

NAFIZ CHOWDHURY

DEGREE: Business/Law –majoring in Finance

CAREER ASPIRATIONS: Banking

To t a l c o r p o r a te va lu e less d eb t ,

t h e fu t u re f r ee ca sh f l ow th a t inves to r s ex p ec t t h e c o mp a ny to g ener ate ove r a de f in ed

t im ef r a m e

d isc o u n ted by t h e c o s t o f c a p i t a l a p p ro p r ia te fo r t h e b u s in ess

FCF OVERVIEW

ExOne 2014 FCF for common equity: 8017.9

3D Systems 2014 FCF for common equity: 22518.84

XONE:

Market: 21.21

-5%: 5.43

0%: 10.17

+3%: 21.94

DDD:

Market: 37.08

-5%: 17.65

0%: 31.42

+3%: 64.77

FCF: MARKET VS ESTIMATES

3 Scenarios

+3% growth

0% stagnation

-5% recession

Long term vs. short term

2014-2020

Intrinsic value vs. Investor behaviour

FCF KEY CONCEPTS

Do not invest

Speculative nature of growth in both methods

recommend holding out for the long term

Until DCF indicates the intrinsic share price for both

firms

RECOMMENDATION