Turnaround stock

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]

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. Many turnaround companies are in serious debt and on the brink of bankruptcy.[2] Catalysts for recovery often include new management, debt restructuring, and improving macroeconomic factors among others.[1]

See also

References

  1. ^ a b "Turnaround: Definition in Business and Finance, Examples".
  2. ^ a b 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.


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