What happened

Shares of 3-D printer-maker 3D Systems (NYSE:DDD) popped nearly 11% in early trading on Monday, but were up just 1.3% as of 12:17 p.m. EST, after investment banker Piper Jaffray relented on its sell rating, and upgraded 3-D Systems stock to neutral.

So what

Ordinarily, investors view an analyst upgrade as good news, and a good reason to bid up a stock. But the situation with 3D Systems stock is a bit different from the ordinary. For one thing, consider the share price.

Priced at $8.34 prior to Piper Jaffray's upgrade, 3D Systems stock jumped as high as $9.25 a share on the back of the upgrade. But here's the thing: Despite that upgrade, Piper Jaffray held its price target on 3D systems steady at $6.25 per share.

What's more, the analyst reiterated its reservations, expressed in a note earlier this month, that heightened competition from rivals such as Stratasys (NASDAQ:SSYS) and -- particularly -- HP (NYSE:HPQ), will present 3D Systems with a "difficult next six months." In short, although Piper Jaffray no longer believes that 3-D Systems stock is a sell, it definitely does not believe that 3-D Systems is a buy just yet.

A 3-D printer

Image source: Getty Images.

Now what

I agree -- at least with the second part of that statement. With no GAAP profits to its name, minimal free cash flow, and a valuation of 90.5 times trailing free cash flow, 3D Systems does not look like any kind of objective buy to me.

Relative to the competition, 3D Systems also looks more expensive than Stratasys. Neither stock has any GAAP earnings upon which to base a value, but Stratasys sells for a significantly lower multiple to free cash flow (30 times) than does 3D. Valued on book value, Stratasys also sports a lower P/B ratio of just 1.0 -- 33% cheaper than 3D's P/B ratio of 1.5.

HP stock looks cheaper than both at just 16 times trailing GAAP earnings and 11.2 times trailing free cash flow. Given that Piper Jaffray views HP as the biggest threat to 3D Systems today, and given the valuation arguments in HP's favor, I'm of a mind to think that selling 3D Systems and buying HP stock instead could be an interesting paired trade.