Finance: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.[4] 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
- Value stock
- Growth stock
- Peter Lynch
External links
References
- ↑ 1.0 1.1 "Turnaround: Definition in Business and Finance, Examples". https://www.investopedia.com/terms/t/turnaround.asp.
- ↑ 2.0 2.1 Bylund, Anders. "What Is a Turnaround?" (in en). https://www.fool.com/terms/t/turnaround/.
- ↑ Lynch, Peter (1989). One Up on Wall Street. pp. 128. ISBN 0743200403.
- ↑ "What Are Turnaround Stocks?". https://www.kotaksecurities.com/investing-guide/share-market/what-are-turnaround-stocks/?.
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