For General Electric (NYSE:GE), it has been a dreadful few years. GE stock, which reliably traded around $30 in 2016, sells for just a third of that value today. The company had to slash the dividend to nearly zero, and even that hasn’t totally resolved concerns about the company’s balance sheet and fiscal health going forward.

If you’re a trader, you might be pleased with GE stock. It is up from $7 earlier this year to $10 now, which is a big move off the lows. But don’t forget that a year ago, GE stock price was still $14. The move back to $10 has hardly repaired the colossal damage that shareholders have suffered over the past three years. With the stock market now at fresh all-time highs, the stock has continued to disappoint by comparison.

GE’s dismal stock performance is in the past, however. Is the recent move up from the low the start of a new recovery phase for General Electric? Or is this simply another little bounce before General Electric stock resumes its slump?

A Company In Transition

Nine months ago, GE got a new star CEO, Larry Culp. This wasn’t GE’s first attempt at fixing the executive suite. In 2017, General Electric elevated John Flannery to the top post to try to reverse the firm’s sliding fortunes. But Flannery barely lasted a year. The company missed guidance quarter after quarter under his watch. The GE Board wasted no time in bringing yet another new chief executive. And in Larry Culp, it looks like they got a most capable leader.

Culp previously served as CEO of Danaher (NYSE:DHR) from 2001 to 2014. During his time there, Danaher stock produced a total return of almost 500% for shareholders. Culp is the first outsider CEO to take the reins in GE’s history and shows the company’s willingness to do a total reboot to try to get back on track. For a company of GE’s pedigree, it’s quite a statement that they were willing to hire from outside the firm.

Culp has shown plenty of willingness to make big moves in his young tenure. Already, General Electric spun off and then merged its transportation business, which has become Wabtec (NYSE:WAB). Culp made a huge sale in healthcare, unloading the biopharma operations for a huge payday. GE raised a few billion from selling part of its stake in GE Baker Hughes (NYSE:BHGE). And the list goes on.

But there’s plenty more left to do. As the GE stock price shows, the market isn’t convinced that Culp has found the right formula to revive General Electric just yet. Let’s take a deep look at GE stock’s pluses and minuses as we are almost a year into Culp’s turnaround efforts with the industrial giant.

A Good Deal With Danaher

If General Electric is to return to its past glory, the first order of business is staying in business. The company needs to make it through this horrid stretch without selling or mortgaging away all its best assets. However, given the company’s difficult financial situation, investors have rightly worried about what all GE will have to sell to make it through this down period.

On that note, General Electric should be commended for its recent biopharma sale. It managed to unload its biopharma division to Danaher for $21 billion. That appeared to be fully valued. Danaher shareholders weren’t particularly ecstatic when they announced the deal, indicating that GE got a solid price. Don’t forget that Culp used to be the head executive at Danaher, which likely gave him some flexibility while negotiating the deal.

The $21 billion is in and of itself great news, giving the company the funds to tackle more than a third of its net industrial debt position. And, of arguably equal importance, by selling biopharma, it allowed GE to stay in healthcare. Previously, analysts had worried that GE would have to exit healthcare altogether in order to raise enough funds to right the balance sheet.

GECAS: A Big Test Going Forward

One of General Electric’s most valuable assets is its jet engine leasing business. Returns in aircraft and engine leasing have historically been very attractive.

Airlines tend to be hard-up for cash. And given the history of vast numbers of bankruptcies in the airline industry, banks tend to be cautious in their lending to airlines. Thus, for airlines to get capital at reasonable prices, they often have to engage with non-traditional lenders.

GE is ideally suited for this. As the manufacturer of jet engines, it knows its industry about as well as anyone. It directly influences supply in the market, and has excellent information about the demand picture as well. Also, in the event of an airline default or bankruptcy, GE is ideally positioned to get its engines back into use at another airline. By contrast, a bank would be clueless about how to monetize an asset like that.

Put all that together, and GE has built a fantastic business in engine leasing. However, many analysts have suggested that General Electric will have to sell it to raise funds. Also, leasing is a rather capital intensive business; it’d likely do a lot to boost GE’s credit rating if they got out of the market.

Thus, leasing is an interesting test of management. Larry Culp has said repeatedly that the leasing business is not for sale. If GE can make it through the cash crunch without selling leasing, it’d be a sign of strength. If they end up selling it over Culp’s protestations, however, it’d be somber news for General Electric stock.

Negative Free Cash Flow

In March, GE stunned investors when it warned that the company’s free cash flow would turn negative for 2019. Even in a year as dour as 2018, GE still managed to bring in more than $4 billion of FCF. So going negative altogether was truly a huge surprise.

With more reflection, however, it makes sense. The company’s negative free cash flow is a culmination of many issues. These include the lost revenue related to Boeing’s (NYSE:BA) plane crashes, the plunge in renewable power demand and the fall of GE Power’s prospects, among other matters.

GE expects its cash flow picture to look better in 2020 and especially in 2021 and beyond. But that may not be soon enough to salvage things for GE stock. As discussed below, GE is starting to run into issues in the credit market. The company’s balance sheet has been questioned, ratings agencies have downgraded the stock, and funding costs are going up. Running negative free cash flow is a very bad look for General Electric as it tries to reassure its investors and creditors.

However, the cash flow crunch may not be as bad as people fear. At least one analyst thinks so. Nicholas Heymann of William Blair came out with an analyst note this week that made the case for GE stock. Among Heymann’s points, he expects GE’s cash flow to surprise to the upside this quarter. Overall, Heymann sees the GE stock price as being worth between $14 and $16 per share. That’d be roughly 50% upside from today’s prices.

GE’s Fiscal Difficulties

In October 2018, Moody’s downgraded GE debt by two notches to Baa1 from A2. That was a big blow for both the firm’s reputation and access to capital going forward. And that downgrade came less than a month after S&P’s own ratings action against GE.

The next month, GE reacted by abandoning its use of the commercial paper market. Large companies with good credit can borrow short-term in commercial paper at attractive rates to fund temporary liquidity needs. When GE stopped using commercial paper, it made the market reassess the company’s overall credit-worthiness.

Since that point, the yields on GE Capital’s various longer-term bonds have moved higher. That’s in sharp contrast to the overall fall in interest rate yields as the Fed sets up to cut interest rates. This suggests that GE’s credit worthiness continues to decline, even after the blockbuster sale of biopharma to Danaher.

It also puts GE in a difficult place going forward with its capital division. A finance operation can’t generate good sound profits if it doesn’t have consistent reliable access to cheap funds. If GE can’t reassure the market that it is a money good creditor, the capital division’s value will be sharply impaired.

The Shrinking GE Power

One of the key building blocks of the new leaner General Electric was supposed to be GE Power. But these efforts have quickly run into trouble. That’s because the demand from utilities for GE’s products has slumped far more than folks had expected.

Utility companies are now looking for just 25-30 gigawatts of capacity. That’s way down from estimates of nearly 50 gigawatts as recently as 2016. The global economic slowdown and trade war worries have done little to help reverse this slump in sentiment. Plus, it turns out, electricity use simply isn’t growing as fast as models had predicted years ago. More efficient appliances combined with slowing population growth has really cut into future electricity demand.

As a result, GE has taken aggressive action to shrink GE Power down to size. It reduced the division’s work force by 10,000 employees. In a related move, it has cut almost $1 billion a year in costs from GE Power. This will all help make GE Power more profitable — or at least stem the losses from shrinking end demand. The division remains stuck with lawsuits, cost overruns and other headaches from previous management regimes, however. If GE stock is going to rebound sharply, GE Power has to perform better in the future.

GE Power Faces An Explosive Issue

Facing these difficulties, GE Power ran into a poorly timed public relations issue. After a large number of explosions, Brazil’s grid operator suggested that GE’s equipment was defective. Reuters reported that:

“There are close to 700 pieces of that equipment in Brazil’s grid, each costing up to 100,000 reais ($26,000). Power transmission companies have already launched tenders to buy replacement transformers while they discuss the costs and a schedule for the changes with GE and regulators.”

GE continues to claim that its equipment is not at fault. However, Brazil doesn’t seem convinced of GE’s innocence in the matter. China’s State Grid corporation has expanded significantly in Brazil in recent years and could take a share of GE’s business in that large country. Notably, Brazil is part of Mercosur — a South American economic union — that just reached a historic free trade agreement with the EU. This could bring in yet more competition for GE in that market. In any case, with GE Power already struggling, this Brazilian issue comes at a most unfortunate time.

Don’t Expect A Healthy Dividend Anytime Soon

Last year, GE slashed its dividend to a mere penny per quarter. That move came on top of another previous dividend cut. You might be asking, why didn’t GE get rid of the dividend altogether, as so many struggling companies do? For one thing, General Electric used to be a storied blue chip dividend payer. The company was viewed as a stable secure source of income for retirees and other risk averse folks. General Electric has a history of paying dividends continuously for decades, and by keeping a payment — even a meager one — it can keep at least some semblance of its past history going.

Also, importantly, many mutual funds and exchange-traded funds have strict rules about what sorts of stocks they own. Many growth and income funds, for example, can’t buy stocks that have no dividend. Many income-focused ETFs would also have to dump GE stock if the company eliminates the dividend entirely. So, in a weird way, even a tiny dividend is useful for keeping GE stock from slumping even farther.

That said, don’t look for GE to bring back a more robust dividend within the next few years. It is largely keeping the dividend for mechanical and sentimental reasons. It’s not sticking with the dividend because it’s a good use of capital. At this point, GE needs all the money it can muster to survive this horrid stretch of business that it is suffering through. Paying out a fatter dividend to shareholders would be irresponsible given the state of GE’s balance sheet. If you want an industrial stock that provides a solid and steady stream of income, the 2019 version of General Electric stock is a bad choice.

Forget Sunk Costs: Would You Buy GE Stock Now?

In investing, it’s always useful to think about what you’d do if you had no position already. If you were a neutral observer of General Electric, and had the option of buying it or rival industrial companies, what would you do? Most likely, you wouldn’t buy General Electric stock right now.

So if you hold GE, you should really pause and consider that. Do you believe GE stock is fundamentally a solid choice for your portfolio today? Or are you hoping that it recovers to its past glories, and that you are able to sell it for a profit?

The stock market doesn’t care what price we buy an investment at — there’s nothing magical about the cost basis for a position. Holding stocks simply to try to get back to break-even is a classic investor error that leads to massive opportunity cost and sometimes results in holding stocks all the way until they go bust.

You get no extra reward for holding a losing stock for many years before it (hopefully) turns around. In the meantime, you suffer a large opportunity cost. With the stock market zooming higher, there are so many better investments that the average person could own instead of General Electric stock.

Bottom Line on General Electric Stock

If you believe in General Electric’s turnaround story, $10 might still be a compelling price to buy at. It’s not a fire sale, like it was at $7, but there’s still a clear path to $15 or higher if management is able to execute and the economy remains strong. But I don’t see the risk/reward for GE stock being particularly compelling at this price. If you’re on the sidelines, there’s no reason to get involved here.

And if you do own GE stock, you should think about whether you are holding it because it has strong prospects, or if you own it hoping to recover losses or some other emotional reason. The General Electric that exists today is far different from the firm that existed in 2007, let alone back in Jack Welch’s glory days.

While Immelt, Flannery and Culp haven’t totally broken up the old GE, the firm has lost so many pieces that had formerly made it great. GE’s financials and banking business in particular was a huge boost to earnings. That’s largely gone now, with small pieces left here and there. Even if General Electric recovers, it’s unlikely to regain its former glory.

As a much more pure-play industrial firm, there’s simply not the sort of upside that you had when GE was an industry-spanning conglomerate. And with this economic recovery already so well-advanced in years, it’s worth asking: What will happen when industrial-heavy GE stock faces the next recession? For now, General Electric doesn’t offer enough reward to justify the risk.

At the time of this writing, Ian Bezek held no positions in any of the aforementioned securities. You can reach him on Twitter at @irbezek.