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The Tuzz Report Idea Generator: Is Stratasys Washed Out?

After a busy week of earnings reports, conference calls and SEC filings, I'm excited to dig into some very interesting names. These are the stocks that I'll be looking at over the weekend.

Any time a company misses consensus numbers on both sales and earnings, then guides the next quarter down below estimates, again on both sales and earnings... but, the stock goes up over 5% on the news, it's a sign that sentiment may be completely washed out on the name. Even management shares the negative outlook as they used the word "difficult" to describe their operating environment seven times on the third quarter conference call. This is the point where contrarians take notice.

The phrase "3D printing" is likely to leave a bad taste in the mouths of most investors, especially those who have ridden the group down 80% or more from 2013 highs. But has the violent two-year drop overshot true value? There are some respected value managers that believe so. Included in this group are PRIMECAP Management, Mario Gabelli and Bill Frels of Mairs and Power, all of whom recently made purchases of Stratasys Ltd. (NASDAQ:SSYS).

A recurring theme on the company's third quarter call was "adjusting the cost structure." For a company that has gone from rapid sales growth to a period of declines, reducing costs is critical. The good news is that there is likely plenty of fat to cut.

The company has approximately $5 in cash on its balance sheet, but burning through a good portion of it before management can orchestrate a turnaround is a concern. Management's complete lack of visibility for 2016 heightens the level of unease, but isn't that usually the case when a business is bottoming?

I don't think that there is much argument that 3D printing has a bright...


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