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2 hammered FTSE 350 stocks with exceptional turnaround potential

Royal Mail’s (LSE: RMG) share price has taken a pasting since June’s EU referendum cast concerns over slowing letters and parcels demand in the months and years ahead.

From the 25-month peaks above 540p per share punched on the day of the vote, Royal Mail has seen its stock value career 25% lower since then. And Britain’s oldest letter carrier extended its downdraught last month with the release of less-than-reassuring trading numbers.

Royal Mail advised that “we are seeing the impact of overall business uncertainty in the UK on letter volumes, in particular advertising and business letters,” forcing revenues across its domestic parcels and letters arm 2% lower during the nine months to December.

While Royal Mail saw parcels volumes and revenues trek 2% and 3% higher in the period, the terminal decline of the letters market sped up thanks to Brexit-related pains — addressed letter volumes sank 6% from a year earlier.

Packages powerhouse

However, the resilience of Royal Mail’s parcels business should go some way to soothing shareholders’ concerns created by the unclear economic outlook. And packages volumes look set to explode as the internet shopping phenomenon grows — recent data from IMRG showed online sales grew 16% during 2016 to an astonishing £133bn.

Furthermore, stock pickers should also be encouraged by the brilliant progress being reported by Royal Mail’s GLS overseas division. Revenues grew in all regions bar Ireland during April-December, the company noted, resulting in a 9% top-line uptick. And ongoing acquisition activity here should deliver stunning sales growth in the longer term.

And in the meantime, Royal Mail’s huge restructuring should help mitigate the impact of broader economic turbulence on profits growth in the immediate future.

I retain a bullish long-term view of Royal Mail, and reckon a forward P/E ratio of 10.1 times — created despite a predicted 3% earnings fall — represents an attractive level at which to buy-in. Moreover, a 5.7% dividend yield adds a very appetising sweetener.

Storage stormer

Self-storage giant Big Yellow Group (LSE: BYG) has also seen its share value trek lower since the EU vote as fears of slowing consumer spending and falling business activity, and with it demand for paid-for space, have risen.

The stock has fallen 22% in value since Britain’s European exit was confirmed.

But I believe investors have been a tad hasty in selling out of the stock. Big Yellow Group saw like-for-like revenues rise 5% during the final three months of 2016, and the business noted an uptick in occupancy rates during both November and December.

And Big Yellow Group’s long-term outlook remains pretty robust as the supply of space in its critical areas of operation, and especially in London, should keep the top line well supported.

The City certainly believes the company’s long-running growth story still has plenty of legs, and has forecast earnings expansion of 10% in the current fiscal year alone. While a subsequent P/E ratio of 19.3 times may not be electrifying, a dividend yield of 4.1% is certainly worth paying attention to.

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Royston Wild 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.