Why 2017 Was a Year to Remember for Stratasys Ltd.

Stratasys Ltd (NASDAQ: SSYS) has been in a rough patch. It was a market darling only three years ago, but the company's growth stalled, losses started to mount, and a strategic shift to longer lead time sales and more on-demand products has been a tough transition.

But in 2017 Stratasys made some key strategic moves that could set the company up to flourish long-term. Now the challenge is executing on its new strategy.

Stratasys returns to its core customer

When 3D printing stocks, and Stratasys in particular, were in the heyday of their growth in the early 2010s, the idea was that 3D printed parts would become commonplace for companies, and consumers would even have printers at their desks. To capture market share, Stratasys bought consumer 3D printer upstart MakerBot for $604 million in 2013, just one example of the missteps it made at the peak of the market.

In 2017, Stratasys continued to pivot away from the consumer market and doubled down on its core customers, which are product engineers and designers. The company introduced the H2000 Large Part FDM 3D Production System, which can be used to build parts of virtually any size. When combined with smaller printers like the F123 Series, which would be used for prototyping products, there's a full suite for engineers and designers from the idea phase to small-scale production.

On-demand parts are an offshoot of this strategy, serving smaller firms and offering capabilities 3D printer owners have on-site. Long-term, these products will help Stratasys build a sustainable business, but right now there are some growing pains for the company to go through.

Financials don't look very enticing... yet

You can see in the chart below that revenue has fallen over the last three years, and Stratasys is still reporting heavy losses.

The weak financials short-term are part of an investment in building out a more sustainable customer base. Here's what CEO Ilan Levin had to say in the third quarter 2017 press release:

Getting multiple systems into the hands of each customer will drive re-sign sales, which are high margin, and incorporate Stratasys into the design process. But it will be a painful process getting financial buy-in at the corporate level.

Stratasys needs to show progress in 2018

2017 was all about Stratasys positioning itself better for the 3D printing market, which didn't turn out to be as consumer-focused as management had previously expected. Instead, engineers, designers, and corporations are seeing the advantages 3D printing can bring when it's a part of their design process. As adoption grows, financials should improve as well.

It's in financials where investors need to see progress in 2018, particularly in returning to growth and swinging back to profitability. I think Stratasys, and 3D printing in general, have a bright future -- but until we see the growth and margin expansion I think is possible for the company, I'm not going to be too bullish on the stock.

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Travis Hoium has no position in any of the stocks mentioned. The Motley Fool recommends Stratasys. The Motley Fool has a disclosure policy.