Turnaround stock

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A turnaround stock is a company's stock whose underlying fundamentals such as sales, revenue, cash flow, etc. have declined for a period of time but investors believe the company still has the potential to "turn around" and perform well in the future. [1] [2]

Contents

Criteria

Different investors have given various definitions of a turn around stock. Peter Lynch famously classifies turnarounds as one of his main six stock categories. Lynch defines turnarounds as stock that have been battered and depressed for a period of time yet have the potential to grow significantly and very quickly. [3] He views these stocks as high-risk, high-reward.

These stocks typically have low P/Es or P/Bs making them potentially undervalued. [4] Many turnaround companies are in serious debt and on the brink of bankruptcy. [5] Catalysts for recovery often include new management, debt restructuring, and improving macroeconomic factors among others. [1]

See also

References

  1. 1 2 "Turnaround: Definition in Business and Finance, Examples".
  2. ↑ Bylund, Anders. "What Is a Turnaround?". The Motley Fool. Retrieved 2025-09-11.
  3. ↑ Lynch, Peter (1989). One Up on Wall Street. p. 128. ISBN   0743200403.
  4. ↑ "What Are Turnaround Stocks?".
  5. ↑ Bylund, Anders. "What Is a Turnaround?". The Motley Fool. Retrieved 2025-09-11.
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