Nano Dimension: Pioneering 3D-Printed Electronics, Is the Stock Undervalued?
Nano Dimension (NASDAQ:NNDM) is a company that has been leading the way in 3D-printed electronics with its groundbreaking DragonFly LDM system. Despite its innovative technology, the stock has experienced volatility in the market, with highs of $21 in 2018 and lows below $1 per share in 2020. The question now arises: Is Nano Dimension stock undervalued?
In the second quarter of 2023, Nano Dimension reported revenues of $14.7 million, marking a 32.8% increase from the same quarter the previous year. While these numbers may appear modest, the growth rate itself is encouraging, especially considering the specialized market the company serves.
It’s worth noting that Nano Dimension’s revenues for the fiscal year 2022 have increased by a staggering 315% compared to the previous year. The company recorded revenues of $43.6 million in 2022, up from $10.5 million in 2021.
Despite these positive trends in revenue growth, the stock price has not reflected the same momentum. So far this year, NNDM shares have only risen by 11% compared to the S&P 500’s increase of 12.9%. This discrepancy may raise concerns for potential investors.
One crucial point to highlight is that Nano Dimension primarily focuses on share price appreciation rather than income. As of now, the company does not offer dividends and is unlikely to do so in the near future. Instead, management plans to reinvest revenues back into research and development to further advance their technologies.
Nano Dimension presently boasts a gross margin of 42.8% as of Q2 2023, showing promise for shareholders if the company can continue to scale its revenues. As the technology matures and gains wider acceptance, improved margins can be expected.
Facing a significant challenge, Nano Dimension’s operating income stands at a negative $246 million, representing an increase from the previous year’s negative operating income of $206 million. This negative trend has translated into an earnings-per-share (EPS) loss of $0.88. Such a situation is concerning for a company trading at under $3 per share and renders the price-to-earnings (P/E) ratio inapplicable.
However, the company does possess valuable assets with $685 million in cash and $346 million in short-term investments, indicating ample reserves to address the high burn rate.
The Price-to-Sales (P/S) ratio for Nano Dimension currently sits at an elevated 12.1x, exceeding the industry average. While this higher ratio could be seen as a red flag for value investors, it is partly justified by the company’s rapid growth and market potential.
It’s important to note that only one analyst covers NNMD stock, and their exceptionally high price target for the firm is $20.
To provide a more comprehensive view, let’s consider a discounted cash flow forecast analysis (DCF). Our analysis suggests a fair market value of $3.69, indicating a potential increase of up to 42.9% in shares.
An additional argument in favor of undervaluation is the aggressive share buybacks conducted by Nano Dimension management. When insiders start purchasing shares, it often indicates positive news on the horizon.
Despite the promising technology and significant revenue growth, Nano Dimension still faces challenges with highly negative operating income and EPS figures.
However, it is worth highlighting that Nano Dimension maintains a strong balance sheet with no debt and a cash reserve of around $1.1 billion as of Q2 2023. This financial stability provides the company with the flexibility to invest in growth opportunities and potentially make strategic acquisitions.
For those bullish on the future of 3D printing technology, Nano Dimension has showcased rapid revenue growth in recent years and is currently trading at a noteworthy discount to its fair market value, according to a DCF calculation.
While the numbers paint a complex picture, investors willing to weather volatility in pursuit of long-term growth may find Nano Dimension to be a lucrative investment opportunity.
