General Electric (GE 1.25%) has struggled for years to regain its footing. Yet one analyst believes the industrial giant may finally be about to turn the corner.

UBS upgraded General Electric's stock to "buy" from "neutral" on Thursday. Analyst Markus Mittermaier thinks shares are worth $14, representing potential upside of more than 23% from current prices.

A miniature gold bull on top of a keyboard button labeled buy

Analysts at UBS are bullish on General Electric's shares. Image source: Getty Images.

Mittermaier believes new CEO Larry Culp's turnaround plan is progressing nicely. Poorly timed acquisitions in past years have resulted in a heavy debt load, but General Electric is using asset sales to raise cash and pay down its borrowings. Mittermaier expects this deleveraging to continue into 2020, strengthening GE's balance sheet in the process. 

Mittermaier also expects the industrial conglomerate to grow its earnings per share by 12% in 2020 and 29% in 2021, fueled in part by the continued strong performance of GE Aviation. In addition, he says the company's industrial free cash flow could triple, to $2.3 billion, in the year ahead. 

Underappreciated on the Street 

Mittermaier argues that other Wall Street analysts are underestimating the progress GE is making with its turnaround strategy and, therefore, undervaluing its stock: 

We question the depth of which consensus captures the ongoing GE evolution. Analyzing GE is not trivial and requires a detailed segment level analysis. This is what we have done. Our view is based on a multitude of proprietary data.

Mittermaier believes that the strengthening cash generation of GE's aviation and healthcare businesses will more than offset declining losses in its power and renewables segments. And as the company's cash flow improves, he anticipates that analysts and investors will begin to value GE's stock more highly. "We expect the stock narrative to change from significant cash drag to successful transformation," Mittermaier said. 

Risks remain

Still, GE's improving fundamentals may already be largely reflected in its stock price, with shares already up more than 55% in 2019 and 66% in the past year. If Mittermaier's forecasts prove accurate, then more gains could lie ahead for investors, but the stock's risk-to-reward profile is now less attractive after its recent gains.

Moreover, not everyone agrees with Mittermaier's rosy outlook. GE's stock got hit hard in August, when a prominent short-seller called the company "a bigger fraud than Enron" and warned that its financial troubles were far worse than management claimed. Today, 10 analysts rate the stock as either a hold or underperform/sell, compared to only seven who rate it a buy, according to Yahoo! Finance. 

With such a wide range of opposing views on the stock, General Electric's shares are likely to remain volatile in the days and months ahead.