3D Systems Corporation (NYSE:DDD) shares fell as much as 4% today in spite of at least one positive report on the company this week. RBC Capital Markets analysts initiated coverage of the company with an Outperform rating and a $118 per share price target. They believe 3D is well-positioned to disrupt the manufacturing industry through its 3D printing technology, and if all the 3D-printed gadgets shown off at CES this year are any indication, they just might be right.

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3D Systems could see double-digit revenue growth

Analysts Amit Daryanani, Mitch Steves and Karl Ackerman say they think 3D Systems Corporation (NYSE:DDD) could see revenue growth of at least 25% over the next several years. They see the company’s 3D printing moving from just prototyping into the mass manufacturing industry as well as the broader consumer market.

In addition to the company’s “organic” opportunities for growth, they think the company will increase its opportunities through acquisitions.

Why 3D’s valuation might be worth it

The RBC team said they do realize that many investors see 3D’s valuation as being high, they think it is justified. They say the technology owned by the company is “massively disruptive” and will affect the $13 trillion manufacturing industry. They also note that 3D has “material market share” and say that it now has seven different printing technologies and metal capabilities after its acquisition of Phenix. They also expect margins to increase thanks to better mix and more acquisitions in the future.

The analysts see 3D printing as one of the IT hardware industry’s few segments which will see at least 20% organic growth over the next several years. In addition, they see a number of catalysts which could provide some tailwinds to these growth trends, like consumer adoption. They also see the healthcare, automotive and aerospace industries as offering the most promising places 3D printing could find growth.

3D aggressively pursues acquisitions

They note that 3D Systems Corporation (NYSE:DDD) has bought out about 40 different companies since 2009, which has resulted in a 46% compound annual growth rate between the 2009 and 2013 fiscal years. As the company continues its aggressive acquisition strategy and also increases its focus on research and development, RBC Capital analysts believe 3D will be able to capitalize on future opportunities.

They’re expecting to see “significant” improvements in margins through 2013 as 3D Corporation (NYSE:DDD)’s revenue mix shifts toward revenue streams with higher margins. These better margins should give earnings per share a boost. Specifically, they expect to see 3D’s recurring revenue move toward 80% of it coming from higher sales of material, software and services. They also believe the company’s materials mix will shift “exclusively to integrated material sales.” In addition, they believe better margins in 3D’s Quickparts Services will result from the company’s recent acquisitions.