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Have £2,000 to invest? Here are 2 FTSE 100 turnaround shares I’d buy in an ISA today

There’s some welcome respite for investors in Pearson (LSE: PSON). Its stock jumped 7% after posting a 2% rise in underlying revenue as its shift to a digital subscription-based business starts to bear fruit.

Digital delight

The global education and publishing business has a long way to go to complete its turnaround, but investors clearly sees this a big step in the right direction. The Pearson share price could now be tempting for those looking for a FTSE 100 turnaround stock, although it’s not out of the woods yet.

Today, management reported “good progress” and “continued momentum” as declines in its US higher education course and student assessment revenues are offset by stabilisation elsewhere in the business.

Adjusted operating profit rose 30% in underlying terms to £144m, which reflected sales growth and savings from its recent restructuring programme. However, first-half statutory operating profit from continuing operations plunged from £233m to £37m, largely due to the lower profit on disposal of businesses and higher restructuring charges in 2019.

Netflix shows the way

Everything now rests on the success of its digital transformation, as it shifts from an ownership model to subscription-based access, Netflix-style, and looks to expand its global reach. The £7.19bn group is also simplifying its business, and is on track to deliver incremental cost savings of more than £330m a year, with the full benefits building next year.

2019 guidance remains unchanged with Pearson expecting to deliver adjusted operating profit of between £590m and £640m, with a return to top line growth in 2020. The future looks brighter after several troubled years, which sees the stock trading 20% lower than five years ago, against a 30% rise on the FTSE over the same period.

It isn’t as cheap as I’d hoped, though, trading at 15.5 times forecast earnings. The forward yield is just 2.3% against a FTSE 100 average of 4.3%, although nicely covered 2.8 times. Fiona Leake believes Pearson could be a worthy long-term investment.

After Sorrell

Investors in global advertising giant WPP (LSE: WPP) have had a similarly rough ride, with the stock down 45% in three years. It also needs to rebuild following the acrimonious departure of founder Martin Sorrell, but my colleague Paul Summers reckons the £12bn FTSE 100 stock is slowly turning itself around

If you are looking for a recovery play, WPP could be more exciting than Pearson. First, it’s cheaper, trading at just 9.2 times forecast earnings. It also offers a markedly superior yield of 6.4%, with decent-ish cover of 1.6. There are headwinds, though, as advertising revenues shift online and analysts warn of a slowing global economy.

Three, two, one…

WPP’s restructuring offers opportunities to release value, as seen with the recent sale of a 60% stake in its market-research business Kantar to US private equity company Bain Capital for more than $4bn. Most of that will be used to cut debt with the balance returned to shareholders. More of this, please.

As with Pearson, the WPP share price has yet to take off. Long-sighted investors happy with a bit of risk might want to get on the launchpad now.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Pearson. 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. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.