Proto Labs (NYSE: PRLB) Inching Towards Financial Growth

A number of companies revealed their third quarter earnings last week and one of them was Proto Labs (NYSE: PRLB). And just like most companies, Proto Labs (NYSE: PRLB) reported a heavy loss their shares after the announcement, of about 20 percent. There were still a few signs of progress that were more face saving rather than signs of growth for the company. Proto Labs (NYSE: PRLB) revenue shot up to 54.6 million dollars, surging by 30 percent and adjusted earnings per share climbed up by 19 percent to 0.44 dollars.

Protomold segment revenue reached 35 million; average revenue per developer was reported 6.29 million and free cash flow stood at 9.7 million dollars. Despite progress in some areas, Proto Labs (NYSE: PRLB) missed the consensus of Wall Street for both revenue and EPS. While most companies would have been proud of this 30 percent surge in their revenue, for Proto Labs (NYSE: PRLB) it just wasn’t enough. It’s certainly not bad but Wall Street would’ve have appreciated a little more considering Proto Labs (NYSE: PRLB) share scenario at the stock market.

The company’s CEO held the European market responsible for its volatile situation; the revenue there has been below estimates. While the company earned a bag of losses in Europe, it had some bright moments in North America where the company grew by 26 percent. One of the key reasons for the drop in the company’s net margin was its emphasis on investing a lot on the Research and Development department. Though it was in accord to the company’s dedication to R&D in the previous quarters, this time it managed to burn up a huge chunk of its third quarter earnings, leaving no room for a significant profit to help raise its share price.

Spending in R&D might not be a bad sign, at least not for the investors. Proto Labs (NYSE: PRLB) is focusing on future projects and speeding up its manufacturing initiatives as well. This means something big is brewing up at Proto Labs (NYSE: PRLB). Spending on R&D always pays off in one or another way. Third quarter also brought 458 developer clients for Proto Labs (NYSE: PRLB). This was less than the previous quarter’s 553 clients. Though the company missed its expected mark, it’s still not bad performance.

For a small company, 19 percent growth in customers and 9 percent growth in per-customer spending are huge signs of progress. Though for the current earnings, Wall Street has slapped the company with a drop of about 20 percent in their share price. Third quarter earning sheet suggested that though there are loopholes to be dealt with, Proto Labs (NYSE: PRLB) is on the right track as far as progress is concerned. It’s a small company and small time progress will benefit the company initially. But they must make sure to cover all those loopholes which have caused the company to suffer a huge drop in their share price.