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Why This 3D Printing Stock Jumped Nearly 9% in October -- After Rising 12% in September

Beth McKenna, The Motley Fool

What happened

Shares of Proto Labs (NYSE: PRLB), a quick-turn contract manufacturer with a growing 3D-printing business, jumped 8.7% in October, according to data from S&P Global Market Intelligence.

For some context, the S&P 500 returned 2.3% in the month, while shares of the two largest publicly traded 3D-printing players, 3D Systems and Stratasys, declined 7.5% and 2.6%, respectively.

Proto Labs stock has gained a whopping 65% so far in 2017, through Nov. 10, versus the broader market's 17.3% return. It's risen 45% since I called it the best stock to buy in the 3D-printing space earlier this year. 

Industrial 3D printer printing a red plastic object.

Image source: Getty Images.

So what

We can attribute Proto Labs stock's pop last month to the company posting third-quarter earnings on Oct. 26 that beat its guidance and Wall Street's expectations, and also providing a better-than-expected outlook for the fourth quarter. The market catapulted shares to a closing gain of 8.2% on the day earnings were released.

In Q3, Proto Labs' revenue grew 12.7% -- or 13.8% adjusted for discontinued services and the impact of foreign currency – and adjusted earnings per share (EPS) rose 9.8% from the year-ago quarter. The company's CNC (computer numerical control) segment has been driving results all year, with year-over-year revenue in this metal machining business soaring 24.7% in the third quarter, after rising 21.8% and 16.4%, respectively, in the second and first quarters.

Now what

Proto Labs has been manufacturing much improved results in 2017 following a slowdown that impacted much of the industrial sector. Those invested in Proto Labs stock are surely pleased with its performance in 2017, and there appears to be no reason to change investment course. Those waiting on the sidelines might consider waiting another quarter or two to see if year-over-year metrics continue to strengthen. Proto Labs is a quality company with strong cash flow, but know that the stock is pricey relative to earnings, trading at a price-to-earnings ratio of 49.3 and a forward P/E of 34.9. 

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Beth McKenna has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Proto Labs. The Motley Fool recommends 3D Systems and Stratasys. The Motley Fool has a disclosure policy.