Why Perceptron Could Be The Next 3D Tech Stock To Triple

January 10, 2013  |  about: PRCP

By Super-trades: Disclosure: I am long PRCP. (More...)

3D printer stocks 3D Systems Corp. (DDD) and Stratasys (SSYS) have been some of the highest flying stocks of 2012. They have more than tripled and have future P/E ratios of over 40. Anything closely associated with 3D technology has been getting attention, with even Organovo Holdings (ONVO.PK), trading on the pink sheets, making a strong move this week.

This is not surprising, as 3D technology is truly amazing and stands to revolutionize manufacturing in the way the Internet revolutionized the digital information age. However, it's not just 3D printing that will revolutionize manufacturing. Enter the reason for this article, which is finding another undervalued company in the 3D tech space.

I believe there is one overlooked stock that has created, in its own words, a "breakthrough technology" using 3D metrology. Perceptron (PRCP) has developed the Helix non-contact metrology system with Intelligent Illumination. This visionary breakthrough (no pun intended) is a world first in 3D metrology sensor technology. Michael Blood, PRCP's director of marketing, noted the following advantages of this new development: choice of laser line number, density and orientation, 3D feature extraction, and the creation of 3D point clouds. The 3D point cloud looks something like a radar-generated weather map. This advance accelerates the evolution of production scalability from launch to ramp-up to full-scale manufacturing.

Management has created this technology for various industries that it is just beginning to develop. As quoted in this article, the once undreamed of Helix non-contact metrology technology is poised to become the new engineering metrology standard.

With regard to its fundamentals, PRCP has a book value of $6.07 and closed yesterday at $7.03. It reported strong growth in the first quarter and said it will see growth the rest of the year. Sales were up 32% in the first quarter of 2013, and the company reported EPS of $0.08 vs. a loss of $0.26 the year before. The backlog increased by $600,000 from June 30, 2012, and remained strong at $30.8 million. PRCP paid a $0.25 dividend this year, which is a 4% yield at yesterday's closing price of $7.03. It has over $3 per share in cash, or approximately $26 million dollars, and no debt. One analyst has it doing $0.44 EPS next year. PRCP has approximately only 8.5 million shares outstanding and a float of only approximately 8 million shares. If I take the $0.45 estimate of PRCP and apply the 40+ P/E of the other 3D tech stocks, DDD and SSYS, I get a share price for PRCP of $18.

With regard to potential obstacles, since PRCP has a strong backlog and has forecast growth for the rest of 2013, the challenges it could face would be macroeconomic weakness that would lead any company to have delays or orders cancelled. Additionally, the roll-out of the Helix technologies could face delays, like any new technologies. These are general risks that any company could face, and all investors should always consider both the upside and the risks.

PRCP is healthy, profitable, and growing. It is in the hottest technology space of 3D technology and about to roll out (in its own words) "a breakthrough technology across many industries." This may be the most undiscovered gem I have seen in a long time. This reminds me of Uni-Pixel (UNXL), another company with a unique technology, that once discovered went from the $7 range (where PRCP is now) to just shy of $20. Again, If i take the $0.45 estimate of PRCP and apply the 40+ P/E of the other 3D tech stocks, DDD and SSYS, I get a share price for PRCP of $18. This may be one of the more exciting stocks to watch in early 2013.

Source: seekingalpha.com