Every day, Wall Street analysts upgrade some stocks, downgrade others, and "initiate coverage" on a few more. But do these analysts even know what they're talking about? Today, we're taking one high-profile Wall Street pick and putting it under the microscope...

No two ways about it -- additive manufacturing pioneer 3D Systems Corporation (NYSE:DDD) has had a very good year. Over the past 52 weeks, shares of the 3D-printing star have gained nearly 50%. The stock won its latest bump in share price just earlier this morning, when analysts at investment bank Piper Jaffray removed their underweight rating and upgraded the shares to neutral, with a $17 price target.

Here's what you need to know.

3D printer

Image source: Getty Images.

Upgrading 3D Systems

With 3D Systems set to report Q3 earnings next Tuesday, Oct. 30, you might expect that Piper Jaffray is making a short-term bet on a quick jump in share price here -- but that doesn't seem to be the case. (Nor does Piper's rating of neutral exactly scream confidence that 3D's short-term results will be amazing.)

Rather, Piper's cautious endorsement of 3D Systems today seems more indicative of its generally positive assessment of the health of the 3D-printing industry as a whole, as TheFly.com explains in a note covering the upgrade this morning: The overall 3D printing industry "remains healthy and the long awaited move to production use of 3D printers is gaining momentum."

In evidence of which, Piper points to 3D Systems' announcement last month that Align Technology is increasing its "investment in 3D Systems' SLA 3D printing technology" to manufacture clear plastic braces for their customers in an "unprecedented use of 3D printing in manufacturing," according to the press release.

What it means to investors

Neither Align nor 3D revealed what financial benefit this "multi-year collaboration" will bring to 3D. In the near term at least, the benefit appears limited, as Piper Jaffray commented that it sees demand for 3D printing services and materials at 3D Systems being only "modestly above plan" in Q3, with demand for actual 3D printers improving somewhat -- but with no indication of how strongly.

Still, the simple fact that that the Align deal happened at all provides evidence that Piper's thesis of "momentum" building in the "production use of 3D printers" has merit. And in further evidence that this is a trend spanning industries, Piper also mentioned a recent deal for German 3D printer maker Voxeljet to begin doing 3D printing work for an unidentified "major European automotive manufacturer."

Consider the alternatives

News items like these tend to support the broader thesis that 3D printing is gaining support in the market. But do they support investing in 3D Systems stock in preference to other 3D printing companies?

Not necessarily -- at least not accord to Piper Jaffray, which says it actually prefers to other companies over 3D Systems. One of these is Voxeljet (a company we've also written about here at The Motley Fool from time to time). A second stock that Piper prefers over 3D Systems is Belgian concern Materialise NV (NASDAQ:MTLS), which specializes in providing software and services for the 3D printing industry.

How do these other 3D printing stocks stack up next to 3D Systems itself? Curiously, all three firms are pegged for 20% annualized earnings growth over the next five years by analysts surveyed on S&P Global Market Intelligence. (You can take that as a coincidence or -- as I interpret it -- as an indication that Wall Street is applying a broad brush to the industry as a whole, and unwilling or unable to pick winners and losers at this point.)

Valuation-wise, however, the stocks couldn't look more different. 3D Systems, with a $1.9 billion market capitalization, is currently the big dog of this industry. In contrast, Materialize weighs in at barely one-third that market cap -- $660 million -- while Voxeljet is valued at less than $100 million by the market.

Currently, none of the three companies is generating positive free cash flow (although 3D Systems is expected to begin generating positive FCF next year, and Materialise could do so as early as the end of this year). Only one of the three stocks (again, Materialise) is GAAP-profitable at present. As such, despite Piper Jaffray's optimism, I cannot say I view any of these stocks as anything other than speculative at best at this point in time.

A better way to invest in 3D printing?

In contrast, one stock that went unmentioned in Piper's survey of the industry -- 3D archrival Stratasys (NASDAQ:SSYS) -- is actually looking a whole lot healthier to me today. Valued at $1.1 billion in market cap, but with $320 million in net cash (bringing its enterprise value down below $800 million), Stratasys isn't currently profitable per se, but it's generated positive FCF of $42 million over the past year, and according to the analysts who follow it, is likely to continue generating at least that much cash profit over the next couple of years as well.

If you agree with Piper Jaffray's broad thesis that 3D printing is starting to gain broader acceptance in industry, and that 3D printing stocks offer a promising area for investment, then I think Stratasys stock, with its rock-solid balance sheet and demonstrated ability to generate cash profit from its business, just might be your best bet to profit from this trend.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.