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Are Petroceltic International PLC, Blinkx Plc And Empyrean Energy Plc 3 Top Turnaround Stocks?

Shares in online advertising company Blinkx (LSE: BLNX) have soared by 28% in the last week after it released an upbeat trading update for the third quarter of the year. While sales were in line with expectations for the period, Blinkx reported a better than expected profit performance and was able to break even based on its adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) figure.

This is clearly impressive news since Blinkx has struggled to adapt to an increasingly mobile-focused industry in recent years. However, its acquisition strategy coupled with the rebranding of its offering appears to be moving it in the right direction. Importantly, the market now seems to have shifted its stance on Blinkx, with its cost-cutting measures and improved sales from core products having the potential to turn the business around.

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Despite this, Blinkx remains a company with a challenging near-term outlook. For example, it’s expected to post a pre-tax loss of £15m this year, followed by a pre-tax loss of £8m next year. And while its third quarter result was impressive, it may be prudent to await evidence of improved performance over a longer period of time before buying shares in the business.

Tough road ahead

Similarly, today’s update from Petroceltic (LSE: PCI) also indicates that now may not be an opportune moment to buy a slice of the oil and gas exploration and production company. Certainly, it’s positive in the sense that the company has received a further waiver of repayments under its Senior Bank Facility extending to 29 January. Furthermore, the company’s lenders have also indicated their willingness to consider further waivers that may be required to continue the strategic review process that was announced on 23 December.

However, it indicates just how challenging the company’s outlook is and with the price of oil seeming likely to remain under a degree of pressure moving forward, Petroceltic’s near-term prospects appear to be rather downbeat. Further losses are forecast for the current year and with a number of other oil-focused stocks remaining profitable, there appear to be better risk/reward opportunities elsewhere.

Sweet Sugarloaf deal

Meanwhile, shares in onshore oil and gas producer Empyrean Energy (LSE: EME) have soared by as much as 68% today after it announced the proposed disposal of its right, title and interest in the Sugarloaf AMI project for $61.5m in cash. Empyrean may also receive a further $10m based on future oil prices and, with irrevocable undertakings from over 23% of its shareholders having been received, the prospects for the deal going through appear to be encouraging.

Proceeds from the sale would be used to pay US tax liabilities, repay the Macquarie facility and to further the company’s strategic goals. Additionally, Empyrean has stated that it will consider the most efficient manner in which to return surplus funds to its investors.

Empyrean’s CEO stated that in the current low oil price environment it would incur either an unacceptable cost or unacceptable dilution when compared with the transaction in order to further develop the Sugarloaf asset. So the sale appears to be a prudent move for the business. And with Empyrean remaining a profitable business that still trades on a price-to-earnings (P/E) ratio of  13.8, for less risk-averse investors it could prove to be of interest.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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