Markforged (MKFG)

3D printer provider Markforged (NYSE:MKFG) met Wall Street’s revenue expectations in Q4 CY2024, but sales fell by 7.4% year on year to $22.37 million. Its non-GAAP loss of $0.42 per share was 11.2% below analysts’ consensus estimates.

Company Overview

Beginning as a start-up at SolidWorks World–an annual design and engineering conference, Markforged (NYSE:MKFG) offers 3D printers and softwares to manufacturers of various industries.

Onshoring and inventory management–themes that grew in focus after COVID wreaked havoc on global supply chains–are tailwinds for companies that combine economies of scale with reliable service. Many in the space have adopted 3D printing to efficiently address the need for bespoke parts and components, but all companies are still at the whim of economic cycles. For example, consumer spending and interest rates can greatly impact the industrial production that drives demand for these companies’ offerings.

Competitors offering similar products include Stratasys (NASDAQ:SSYS), Desktop Metal (NYSE:DM), and 3D Systems (NYSE:DDD).

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, Markforged’s sales grew at a sluggish 4.3% compounded annual growth rate over the last four years. This fell short of our benchmark for the industrials sector and is a rough starting point for our analysis.

Long-term growth is the most important, but within industrials, a stretched historical view may miss new industry trends or demand cycles. Markforged’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 8.2% annually.

This quarter, Markforged reported a rather uninspiring 7.4% year-on-year revenue decline to $22.37 million of revenue, in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 12.4% over the next 12 months, an improvement versus the last two years. This projection is commendable and suggests its newer products and services will spur better top-line performance.

Gross profit margin is a critical metric to track because it sheds light on its pricing power, complexity of products, and ability to procure raw materials, equipment, and labor.

Markforged has best-in-class unit economics for an industrials company, enabling it to invest in areas such as research and development. Its margin also signals it sells differentiated products, not commodities. As you can see below, it averaged an elite 52.1% gross margin over the last five years. Said differently, roughly $52.14 was left to spend on selling, marketing, R&D, and general administrative overhead for every $100 in revenue.

In Q4, Markforged produced a 44.8% gross profit margin, marking a 3.6 percentage point decrease from 48.4% in the same quarter last year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Markforged’s high expenses have contributed to an average operating margin of negative 72.3% over the last five years. Unprofitable industrials companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.

Analyzing the trend in its profitability, Markforged’s operating margin decreased by 56.4 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Markforged’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, Markforged generated a negative 67% operating margin. The company's consistent lack of profits raise a flag.

Revenue trends explain a company’s historical growth, but the change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Although Markforged’s full-year earnings are still negative, it reduced its losses and improved its EPS by 19.7% annually over the last two years.

In Q4, Markforged reported EPS at negative $0.42, up from negative $0.58 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates. Over the next 12 months, Wall Street expects Markforged to improve its earnings losses. Analysts forecast its full-year EPS of negative $2.04 will advance to negative $1.06.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Markforged’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 58%, meaning it lit $57.96 of cash on fire for every $100 in revenue.

Taking a step back, we can see that Markforged’s margin dropped by 63.8 percentage points during that time. Almost any movement in the wrong direction is undesirable because it is already burning cash. If the trend continues, it could signal it’s becoming a more capital-intensive business.

Markforged burned through $24.85 million of cash in Q4, equivalent to a negative 111% margin. The company’s cash burn was similar to its $10.29 million of lost cash in the same quarter last year.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Markforged burned through $62.71 million of cash over the last year. With $53.63 million of cash on its balance sheet, the company has around 10 months of runway left (assuming its $5.77 million of debt isn’t due right away).

Unless the Markforged’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.

We remain cautious of Markforged until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

We struggled to find many positives in these results. Overall, this quarter could have been better. The stock remained flat at $4.57 immediately after reporting.

Updated: July 7, 2025 at 11:43 PM EDT

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Markforged.

Markforged isn’t a terrible business, but it doesn’t pass our bar. To begin with, its revenue growth was uninspiring over the last four years. And while its admirable gross margins indicate the mission-critical nature of its offerings, the downside is its declining operating margin shows the business has become less efficient. On top of that, its cash profitability fell over the last five years.

Markforged’s forward price-to-sales ratio is 1x. The market typically values companies like Markforged based on their anticipated profits for the next 12 months, but it expects the business to lose money. We also think the upside isn’t great compared to the potential downside here - there are more exciting stocks to buy.