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Author: Trololololo Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 540  
Subject: DDD valuation and growth source Date: 1/19/2013 6:21 PM
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It's hard not to be seduced by the rapid stock price appreciation of 3D Systems (DDD). David Gardner and other commenters on MF are singing the company's praises. It's truly a hot stock. But I want to hear your thoughts on its valuation - is buying into a company whose stock has a PE of 96, a PEG of 2.56 and a short ratio of 8.60 a warning to look beyond the story around this company?

I belong to MF Stock Advisor and the Million Dollar Portfolio. To see the cheerleading around DDD makes me wonder if all we see are unicorns. But I worry about storm clouds, specifically how DDD accounts for revenue growth. A hard look at DDD shows that the vast amount of the company's growth is not from ORGANIC growth, but rather from the many acquisitions DDD has made in the past few years. Could this be masking a company that when viewed organically, is really not growing at all?

I urge you to read an insightful article, "3D Systems: A Sobering Reality on the Seeking Alpha website:

It takes a hard look at 3D Systems' negative cash flow, how the company accounts for organic revenue and earnings growth, and the methods used by the company's accounting. The article gave me pause. As many of you are more experienced in mining financials, I hope that you will read the article and respond with your thoughts.

It's tempting to invest in a company like 3D Systems for all the promise that this might have. But I have always invested in businesses with PEG ratios of 1.0 or less, particularly those with strong cash and cash flow positions, as well as little or no debt. Is it too easy just to blindly follow the happy story of 3D Systems that you read in MF, or should I stick to my principles, given that I invest to hold a stock for 10 years or more?
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