The Motley Fool

2 under-the-radar turnaround stocks with recovery potential

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Buying shares which have fallen in value in recent months may seem like a risky move to make. After all, the trend is a downward one and further losses could be ahead. However, the reality is that in many cases the outlook for the company in question remains relatively upbeat. Therefore, a lower share price may make the risk/return ratio even more attractive to a long-term investor. With that in mind, here are two shares which could deliver improved share price performance after a disappointing period.

Improving performance

Reporting on Wednesday was BATM Advanced Communications (LSE: BVC). The provider of real-time technologies for networking solutions and medical laboratory systems delivered a rise in revenue of 10% in the first half of the year. Gross profit also increased after a period of meaningful investment in new products, capability and bolt-on acquisitions. Such investments have the potential to improve the long-term outlook for the business and place it on a firmer financial footing.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

The company made solid progress in its Bio-Medical division, as well as in its Networking and Cyber divisions during the first half of 2017. It expects to make further inroads in these areas, with a target of gaining new customers and developing its sales potential. Government agencies continue to express interest in its Cyber division, with BATM’s order backlog increasing substantially compared to the same time last year.

The company’s increasingly positive outlook has the potential to deliver improved share price performance in future. In the last six months, its share price has fallen by around 10%. While it remains a lossmaking business and a relatively risky investment opportunity, it has the potential to recover in the long term.

Defensive option

Also disappointing in terms of its share price performance in recent months has been food and support services provider Compass Group (LSE: CPG). The company’s share price has declined by 5% in the last three months. However, it could easily recover and make strong gains in future.

One reason for this is the company’s defensive characteristics. It has a long track record of profits growth, and this could appeal to investors given the current geopolitical outlook for the world. Tensions regarding North Korea have already negatively affected investor sentiment and share prices. More could follow, and investors may become increasingly risk-off, thereby seeking more stable companies over the medium term.

With Compass Group forecast to increase its bottom line by 18% in the current year, it seems to offer significant growth potential as well as defensive attributes. Despite this, it trades on a price-to-earnings growth (PEG) ratio of just 1.2 at the present time. This suggests that it offers a wide margin of safety and that it could post significantly better share price returns in future.

Alongside its growth potential, the stock also has a growing dividend. It has risen by 49% in the last four years and with dividends covered more than twice by profit, more growth in shareholder payouts could be ahead. This could boost its 2.1% dividend yield.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has recommended Compass Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.