New materials are expanding Proto's potential market. A series of new plastics were introduced in 2012. Stainless steel, magnesium, and copper also were launched for use in the CNC segment. The range of machinery at the company's facilities was broadened, as well. The new materials already have begun to accelerate Proto's overall growth rate. Demand for the company's historical materials is continuing to widen, moreover, as new customers are added and existing users expand their use of Proto's services. About 75% of sales are made to repeat customers. The new materials promise to help Proto reach a larger share of the prospective market, which remains in an early stage of development. Geographic expansion also is likely. Proto currently focuses on North America and Europe. More emphasis on emerging markets is likely in future years.
The trend towards personalized manufacturing could amplify results over the long haul. Tighter software integration between engineering and manufacturing, along with more versatile production methods, is likely to facilitate greater customization. Consumers are likely to enjoy a greater selection of features, even in fairly complex and expensive products. Manufacturers are likely to embrace more options as a method for increasing market share; perhaps total industry sales. Producers may take some of that incremental production in-house, same as they do now. But Proto's overall market could widen dramatically, nonetheless.
Meantime, expansion of the customer base combined with the availability of new materials and services promise to keep growth at a superior level. We estimate 2012 sales advanced 26% to $125 million to provide income of $1.00 a share. Shares outstanding rose 24% last year due to the company's initial public offering. This year sales of $155 million (+24%) appear achievable. Earnings could reach $1.25 a share. In 2-3 years earnings could attain $2.15 a share on sales of $250 million. Applying a P/E multiple of 25x suggests a target price of $55 a share, potential appreciation of 45% from the current quote. The stock price already reflects much of Proto's 2-3 year potential. Conservative investors are advised to wait for an entry point with more attractive risk reward characteristics.
( Click on Table to Enlarge )