5 Top Turnaround Stocks: WM Morrison Supermarkets PLC, Burberry Group plc, Tullow Oil plc, Rolls-Royce Holding PLC And International Consolidated Airlines Grp


Even though Morrisons (LSE: MRW) is set to have no permanent CEO imminently, now could still be a great time to buy a slice of it. That’s because investor sentiment could pick up sharply once the new CEO is announced, and even more so once the company’s new strategy is formulated as investors begin to see that Morrisons does have significant growth potential.

Certainly, its past performance has been poor (its shares have fallen by 22% in the last year), but this does not necessarily mean that its future returns will be similar. After all, with the UK consumer due to experience an increase in disposable income in real terms this year, the pressure on food prices may not last the course of 2015.


It may seem strange to talk about Burberry (LSE: BRBY) as a turnaround stock. After all, its share price is up 16% so far this year. However, its progress as a business has been somewhat slow, with Burberry due to report a decline in earnings of 1% in the current year.

Looking ahead, though, this is set to change considerably. That’s because Burberry is forecast to increase its bottom line by 11% next year, and by a further 10% the year after. And, with there being the potential for further Chinese stimulus measures, it could gain a boost not only from improving sentiment, but also from higher sales over the medium term, too.

Tullow Oil

Even though the oil price is still just $60 per barrel, oil stocks such as Tullow Oil (LSE: TLW) have seen sentiment pick up strongly in recent weeks. In fact, Tullow Oil is up by 10% in the last month and, looking ahead, more stunning share price performance could lie ahead.

That’s because Tullow Oil appears to be very cheap at its current price level – even though there is a very real threat of further oil price falls. For example, Tullow Oil trades on a price to earnings growth (PEG) ratio of just 0.2, which means that even if its earnings forecasts are downgraded, its margin of safety appears to be sufficient to warrant a higher share price.

Rolls Royce

Shares in Rolls Royce (LSE: RR) endured a tough fourth quarter of 2014, after the industrial play disappointed investors with a profit warning in October. However, since then its shares have risen from a low of around 800p to their present price of 960p and there could be more to come.

That’s because Rolls Royce is forecast to deliver earnings growth of 9% next year, which is ahead of the wider market’s expected growth rate. Despite this, Rolls Royce trades on a lower price to earnings (P/E) ratio than the FTSE 100, with it having a P/E ratio of 15.7 versus 15.9 for the index. As such, Rolls Royce could see its shares experience an upward rerating, with it being deserving of a premium to the wider index.


After a challenging period where it slipped into loss-making territory, IAG (LSE: IAG) seems to be on the up, with investor sentiment pushing its share price up by 15% since the turn of the year.

That’s largely because the market is anticipating strong growth numbers from IAG which, along with its airline peers, continues to benefit from a low oil price. For example, IAG is forecast to post bottom line growth of 57% in the current year, followed by a further 28% next year.

Despite this impressive growth potential, IAG still offers excellent value. It has a price to earnings growth (PEG) ratio of just 0.3 and, as a result, its share price could be about to move significantly higher over the medium term.

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Peter Stephens owns shares of Morrisons. The Motley Fool UK has recommended Burberry and Tullow Oil. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.