Nano Dimension: An Interesting Speculative Buy Based On Cash On Hand (NASDAQ:NNDM)

Nano Dimension Stock is Significantly Undervalued

Nano dimension Ltd. (NASDAQ:NNDM) has continued to fall through over the past year since our last analysis on the stock, bringing it down to further discounted prices (-23% over the last year). The company, which is involved in 3D printing and AI investments and acquisitions (Figure 1), has struggled to gain any ground throughout 2022 and now sits deeply discounted according to the sum of the parts through said acquisitions, and total cash on hand. The company is well-positioned to continue to grow at a rapid pace, as their products are in increasing demand, and therefore its growth prospects are excellent.

Figure 1. Nano Dimension brings multiple 3D printing and artificial intelligence businesses together under one roof to provide accelerated innovation & growth

The company has done a great job making slow calculated investments in the field of micro 3D printing and it has paid off through strong revenue growth and diversification. For the stock to really turn around and trend upward, we will need to see a push towards profitability as companies that are not making money are not performing in the current markets (microcaps). We will also need to see detailed plans laid out by the management team as forecasts, estimates, and general business direction has been laid out little to none for investors despite having a strong storyline. If this along with a general macroeconomic market turnaround happens in 2023, we could see the stock as much as doubling back to the $4 to $6 range, in our opinion. This makes Nano Dimension a good international lower risk, higher reward investment in innovative small cap technology.

Breaking Down Nano Dimension

Nano Dimension’s stock is currently trading at ~$2.70 per share. The stock has had a 52-week range of $2.06-$4.16 and sits at a market capitalization of ~$640 million. Nano Dimension is a global leader in the additive manufacturing of electronics through 3D printing and still holds tremendous amounts of cash from sale of stock at all-time highs now well over a year ago. The stock boasts over a billion dollars in cash on hand with less than $12 million in debt, giving them a rare negative enterprise value and a cheap price to book ratio of just 0.5x book value. Investors are betting that copious amounts of spending will be needed before the company can deliver attractive results, and we disagree with this undervaluation, as NNDM has proven they can do a good job of unlocking value through a number of smaller acquisitions (Figure 2). We believe the stock should at least trade near a positive EV, which would indicate as much as 50-70% upside from current prices. At these deeply discounted prices, although speculative, a merger or acquisition from a larger entity would make sense in our view to unlock the potential within NNDM. Fitting candidates would include 3D Systems Corp. (DDD) and Stratasys Ltd. (SSYS). A big move like this could propel the stock higher at a rapid pace, but for the time being it appears low volume & stock movement could be a constant reality barring any breaking news.

Figure 2. Nano Dimension continues to develop diverse new opportunities in the 3D printing realm

Risks

Nano Dimension’s stock is traded on the Tel Aviv Stock Exchange and the Nasdaq Capital Market being based out of Israel. Any international stock comes with an additional amount of uncertainty. The company is also still in the development stage and has not yet commercialized any of its products at scale. Nano Dimension’s stock is also volatile, and the company’s share price has been known to fluctuate rapidly in both the upward & downward direction experiencing strong dilution through the sale of stock in 2021. Investors should be aware of these risks before investing in Nano Dimension’s stock. Nano Dimension’s debt level is no issue with large amounts of cash on hand. Some additional risks associated with investing in Nano Dimension’s stock include the company’s limited operating history & in turn unpredictable guidance estimates, uncertain future profitability, and reliance on a small number of key personnel (~300 employees). Despite these risks, Nano Dimension in our opinion has a good risk vs. potential return trading well below the value of cash on hand and could unlock value in a number of ways if investors are willing to have the patience to wait out their next big move.

Overall Summary

As stated, Nano Dimension is an ever growing 3D printing company that trades near 52-week lows. While the company’s stock is deeply discounted, 3D printing could be the next big niche industry to take off over the next half decade or sooner. Acquisitions at a fair price and slowly growing sales numbers will continue to grow the stocks revenue and push towards improving profitability. Nano Dimension could be considered for a very small portion within one’s speculative portion of their portfolio on the account that it trades below the sum of parts. Potential for a big move in 2023 or beyond is there with NNDM purely because of the industry they are in and their unique cash situation (Figure 3). We believe much further downside below the $2-$2.5 range is rather unlikely with upside targets within the $4.5-$5.5 range realistic, giving the stock a solid long-term risk-return ratio.

Figure 3. Very few names in any industry have a cash situation quite like Nano Dimension giving them the opportunity to be an unparalleled growth vehicle for 3D printing