Investors in 3D printing stocks have been on a wild ride over the last year. Finding companies with high return potential where risk is also mitigated is both challenging and rewarding.

Tinkerine Studios, (TKSTF) on the U.S. OTC and (TTD.V) on the TSX Venture Exchange, is a company that I believe has high return potential with reduced risk due to reasons I'll explain in this article.

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Competition at the consumer level of the 3D printing space is understandably intense, as the market for 3D printing in homes and schools is expected to experience sustained and substantial growth over the next decade. Strategy Analytics predicts the consumer 3D printer market alone will reach $10 billion by 2024. Wohler’s Associates also notes that much of the industry’s 34.9% compound annual growth rate over the near term (CAGR) “will be fueled by sales of under $5,000 personal 3D printers."

While this growth represents a compelling investment opportunity, there are distinct obstacles facing the 3D printing stocks that are pure plays in the consumer market. These obstacles include:

Lack of cash

Inexperienced management

An average consumer 3D printer that's not competitive

Inability/failure to target a high growth niche for the company to aggressively pursue and potentially dominate





Company Overview

The Tinkerine brand name is derived from early DIY 3D printing adopters, often referred to as “tinkerers.” Tinkerine Studios was founded in 2012 and manufactures and sells 3D printers, software and materials for the consumer, prosumer, and education markets.

Headquarters: Vancouver, B.C.

Shares Issued/Outstanding: 41.6 Million

Market Capitalization: $12.5 million USD.

By far the lowest market cap for any 3D printer OEM with a sales history

See also: June Investor Presentation





Cash Position and Revenue Flow

Lack of cash and current revenue flow to successfully implement the business plan is a key obstacle to success for pure play consumer grade 3D printer manufacturers. Although Tinkerine Studios just began trading in the U.S. in June, the company has an established sales history and received coveted awards in the “Surprise Hit”, “Best Value”, and “Best Documentation” categories from MAKE Magazine for their “Litto” and “Ditto+” printers.

I recently spoke with CFO Martin Burian who told me the company has sufficient cash following their capital raise and public launch to fund operations and execute their business plan over the next 18 months.

Martin also explained that revenue flow is expected to increase in the coming months:

“As we enjoy the fruits of our base line business expansion we will have positive contribution from incremental sales. That means our cash will last longer or we will accelerate our business roll out and incorporate new initiatives."





Competitive New Product Launch

Another obstacle for consumer grade 3D printer manufacturers is the lack of a product that’s aggressively priced and well-differentiated from the competition. Tinkerine is currently launching their DittoPro series (shipments began in June) with simple plug and play functionality for the consumer and education markets.

The new DittoPro has a larger build volume, higher resolution range, and is priced $1,000 less than their largest competitor, the MakerBot Replicator.

Machine Tinkerine

DittoPro MakerBot

Replicator Build Volume 469 cubic inches 456 cubic inches Layer Resolution 50-300 microns 100-300 microns Price $1,899 $2,899

While subjective, I also find the DittoPro to be more aesthetically pleasing compared to other printers in the consumer space. Good looks combined with superior performance and an attractive price separate this new printer from the crowd as readers can see in this recent DittoPro launch video below.

New product launches like the DittoPro are a key driver for revenue and earnings growth and that driver is optimized when the product being launched is superior to the competition in form, function, and price combined.





Aggressive Education Push Addressing STEAM Initiatives

Public and private K-12 schools are increasingly using 3D printing in classrooms for STEM (science, technology, engineering and math) and STEAM (includes arts) education initiatives. According to the NMC Horizon Project, 3D printing is expected to rapidly become a major player in STEM education in the next several years. As a “Visualization Technology”, researchers have found that "3D printing can tap the brain’s inherent ability to rapidly process visual information, identify patterns, and sense order in complex situations."

3D printing allows for more authentic exploration of objects that may not be readily available to education institutions, including animal anatomies and toxic materials

The exploration of 3D printing, from design to production, as well as demonstrations and participatory access, can open up new possibilities for learning activities

Typically, students are not allowed to handle fragile objects like fossils and artifacts; 3D printing shows promise as a rapid prototyping and production tool, providing users with the ability to touch, hold, and even take home an accurate model

As a result, 3D printing in K-12 education is an enormous and virtually untapped market, and Tinkerine is the only publicly trading 3D printer manufacturer to make it their primary target. However, targeting the education industry and successfully transforming the opportunity into rapid revenue and income expansion for investors are two different things. Tinkerine believes that success in this market will require more than simply offering 3D printers to schools…that success will be largely dependent on also providing a comprehensive 3D printing curriculum that meets the needs of both educators and students.

Last month Tinkerine announced the addition of Kevin Brandt as Managing Director for their education focus. Brandt has some 20 years of experience as an administrator at one of the largest and most progressive public online schools, and as Director of Instruction of one the largest school districts in Canada.

Current member of Canadian Parliament, Russel Hiebert, has also been added to Tinkerine’s advisory board in an appointment that could prove instrumental as the company launches their public education initiative.

Tinkerine has partnered with with Ready Labs, an online educational content provider and spin-out of acclaimed Simon Fraser University in launching a comprehensive online program called Tinkerine U (see web site). Tinkerine U is built specifically to meet the needs of STEAM education initiatives now being launched by public schools throughout North America. There simply is no other public 3D printer manufacturer offering STEAM-specific educational content and this includes MakerBot.





Conclusion

With an experienced management team, (including former managers at both MakerBot and Shapeways), the new DittoPro’s competitive strengths, cash position and current revenue flow, I’m a buyer of TKSTF shares here. With a current market capitalization of just $12.5 million USD, I believe Tinkerine Studios is markedly undervalued and offers investors the potential for high returns over the next 6-12 months.

When these factors are then combined with Tinkerine’s 3D printing curriculum being built from the ground up to meet STEAM education initiatives at North American schools, I believe there is strong potential for a substantial rise from the current market cap of only $12.5 million and .30/share.

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Disclosure: I am long shares of Tinkerine Studios.

Gary Anderson