Why Materialise Stock Was Falling on Tuesday

What happened

Shares of Materialise (NASDAQ:MTLS) were down 12% as of 1:29 p.m. ET on Tuesday after the company reported earnings results for the fourth quarter. The 3D printing services provider beat on revenue but missed on earnings, which sent the stock tumbling.

Inconsistent operating results have kept the stock from taking off. The stock has fallen 83% over the last three years, but the post-earnings sell-off has almost wiped out the year-to-date gains.

So what

On the surface, it wasn't a bad quarter. Revenue increased 10% year over year in the fourth quarter, on top of a 12% increase for the full year. That looks strong considering the disruptions with the war in Ukraine and other macroeconomic headwinds over the past year.

Management said that higher costs for labor and energy weighed heavily on margins, which led to the earnings miss in the quarter. However, executive chairman Peter Leys noted that the company prioritized the sustainability of revenue growth over maximizing near-term profits last year, and there's nothing wrong with that if you're a long-term investor.

One highlight was a 20% increase in deferred revenue from software, driven by a notable increase in medical software sales. Management's investments in this market could be a sign of more growth to come, especially as it relates to profitability, where the market seems to have soured on the stock today.

Now what

The company has made several investments over the last year to position itself for long-term growth. Its recent acquisitions of Link3D and Identify3D position the company to serve other organizations looking to streamline their digital manufacturing, supply chains, and workflows.

However, investors are going to be extra sensitive to misses on either revenue and earnings, given the increasing competition in 3D printing services, most notably from larger tech companies. On that note, investors should be cautious before calling the stock a bargain at these levels.

10 stocks we like better than Materialise
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

They just revealed what they believe are the ten best stocks for investors to buy right now... and Materialise wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of February 8, 2023

John Ballard has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.