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Now that General Electric (NYSE: GE) management has finally given guidance for 2019 and indicated the direction of earnings and cash flow for the coming year, the bull/bear debate over the stock is likely to change. Much of the uncertainty has been removed, and investors now have a clearer view of events. That said, let's took a closer look at how investors might choose to look at and value the stock -- the differences are significant.

The key question for GE investors

The debate boils down to an existentialist question over what kind of company General Electric actually is and how best to compare its valuation. Is GE a diversified industrial conglomerate, or is it an aviation company with far smaller power and renewable-energy businesses attached, and possibly a healthcare segment?

It may seem like an academic debate, but actually, it matters a lot for how you might evaluate and price the stock. GE bears tend to favor viewing it as an industrial conglomerate, while the bulls tend to favor the latter approach.

An industrial conglomerate

The big advantage of conglomerates is that their diversity of businesses usually ensures an ongoing stream of earnings and cash flow through any business cycle. In addition, businesses that require a massive upfront investment in solutions, such as GE's gas turbines and aircraft engines, need the ongoing cash flow from less cyclical businesses, such as GE's healthcare segment.

They are often valued on a traditional basis using the forward price to earnings or forward price to free cash flow (FCF). Immediately, we can see the problem with GE: Management recently outlined that industrial FCF would be negative in 2019, and it looks likely that it won't improve to a level commensurate with the $4.3 billion recorded in 2018 by 2020 at the earliest.

It's time to get philosophical over GE stock. Image source: Getty Images.

Putting this into context, here's the FCF outlook and valuation for GE's most direct peers, Honeywell International and United Technologies. As you can see below, if you stick to a rigid, one-year-out view, GE stock is to be avoided like the plague.

However, even with a slightly longer-term viewpoint, there's still a powerful bear case to make. For example, the average of Honeywell's and United Technologies' forward price-to-FCF multiples is 18.7 times. For GE to get that multiple given its market cap, it will need to generate $4.8 billion in FCF, but it's far from clear if GE will hit that in 2020, let alone 2021.

Data source: Company presentations. Table by author. *Adjusted FCF guidance. FCF = free cash flow.