In the Near Future, You'll Regret Not Investing in This High-Yielding Stock
In the Near Future, You'll Regret Not Investing in This High-Yielding Stock
Do you recall your first experience with the internet? For some, it feels like an eternity ago when we were installing a dial-up internet program for the first time. It was sluggish. It was faulty. It was challenging to fathom how something with such noticeable flaws would transform the world.
However, the internet evolved continuously from its inception, revolutionizing numerous billion-dollar industries in the process. And history might be on the brink of repeating itself.
Xometry (XMTR 13.85%) is one of the most underrated businesses on the stock market. Yet, it might be at the forefront of a significant shift in manufacturing.
Why this is a captivating investment proposal
Most individuals don't engage with the manufacturing sector on a daily basis. However, it remains colossal. Xometry focuses on six manufacturing processes, including injection molding and 3D printing. These six sectors represent a $260 billion opportunity. Expanding into other areas would further expand its market.
Unlike most individuals, several companies regularly interact with the manufacturing sector. They require custom parts, prototypes, and substantial production runs.
Many manufacturing facilities are small, and the market is fragmented. As a result, it can be challenging for companies to find the most skilled facilities at the best prices. It can be even more challenging to communicate manufacturing needs, obtain quotes, and initiate production in a timely manner.
Xometry provides an online marketplace powered by artificial intelligence (AI) to address these issues. The company aims to create a platform that makes it simple to submit a job proposal. The AI instantly provides a price quote. If the buyer agrees to the price, Xometry outsources the job at a lower price to its network of small shops. Then, it profits from the difference in what it charges and what it pays.
I find this investment idea intriguing because Xometry is tackling a sizeable market, which could be lucrative. However, it's also specific enough to avoid excessive unwanted attention and competition. Moreover, as it expands, it can develop a network effect that could turn into a competitive advantage.
In addition, I believe it's logical to expect this idea to grow, just like the internet has for decades. It seems likely that the digital revolution for manufacturing will only continue. Therefore, Xometry should only have a tailwind at its back. As companies experiment with its platform for the first time and realize its effectiveness, adoption should skyrocket.
But what about the execution?
Not all good ideas translate into successful investments – companies must also execute effectively for an extended period. When evaluating Xometry's trajectory, it's crucial to consider both the appeal and the functionality of its platform.
Starting with its appeal, Xometry's user base is growing at a remarkable pace. In 2023, it added about 15,000 net new active buyers for 36% year-over-year growth. And in the first quarter of 2024, it added about 3,000 more.
Xometry is also making strides on the supplier side of its marketplace – the small, independent shops that execute the jobs. As of the first quarter, it has 3,400, up 36% from the prior-year period.
In summary, I'd say Xometry's platform is appealing to businesses and manufacturers due to its rapid growth.
Moving on to its functionality, investors should be optimistic in this regard as well.
Xometry's gross-profit margin increases when the spread improves between what it charges and what it pays. The trend is inconsistent. However, the long-term trajectory shows notable improvement in this area, suggesting the company's AI is performing as intended.
Xometry isn't guaranteed to succeed. Perhaps the economics of the business will regress. And it's possible that new competitors will enter the space with superior technology. In that case, investors will be thankful they stayed on the sidelines.
However, if it continues to grow its user base, and its platform continues to price jobs appropriately, then it's reasonable to expect Xometry to gain market share in a $260 billion market as the sector becomes increasingly digitized. If that happens, then this could be an outstanding investment opportunity.
For perspective, Xometry trades at a low 1.6 times its trailing sales, and its market valuation is only $770 million. That's an inexpensive price and a small market value for a company that could emerge as an undisputed leader in such a large market. Therefore, I believe that within a few years, many investors will wish they had purchased Xometry stock at today's prices.
This investment in Xometry could be financially rewarding, given its focus on revolutionizing the manufacturing sector through its AI-powered platform. The company's platform, which simplifies the process of submitting job proposals and obtaining price quotes, is particularly appealing to businesses and manufacturers. Moreover, the company's continuous growth in its user base and supplier network suggests a strong execution strategy. In terms of finance, Xometry's low valuation compared to its potential market share in the $260 billion manufacturing industry makes it an attractive investment opportunity. With investing in mind, this manufacturing digital revolution could yield substantial returns, much like the evolution of the internet has done for various billion-dollar industries over the past decades.