Is Carillion(LSE: CLLN) a dead dog that won't lie down?
At 57p, the shares are priced as if it's already on the truck to the glue factory, and my first thought after the firm's shock profit warning in July was to keep at least a bargepole's distance away.
I was afraid we might hear even worse news - when new management take over, they often find further unpleasantness that had previously been overlooked.
But looking at first-half results released Friday, that worry is receding. While they were described as "disappointing", with full-year revenue now expected to come in between £4.6bn and £4.8bn (from earlier expectations of £4.8bn to £5.0bn), the company's approach to solving its problems looks reasonably solid.
As part of its refocus on core businesses - support services, infrastructure and building - Carillion has already made disposals to the tune of £300m and is engaged in discussions for the sale of its Canadian business and its UK healthcare business.
There's a further £140m facility agreed with the banks, but that is admittedly on top of average full-year net debt expected to be between £825m and £850m. And the firm's pension deficit has been reduced by £80m with, "potential to reduce further by £120m", although there's still a long way to go there.
Overall, things still look gloomy. But I'm starting to think that the outlook is not as bleak as the current share valuation suggests. After today's 11% fall, the shares are trading on a trailing P/E (based on 2016 earnings) of only 1.6 - and that rises only to 2.2 on current forecasts for 2017.
To me, that prices the company as if it's going to go bust - or on the basis that it would need a bailout that would wipe out the interests of existing shareholders.
Now, I can't see Carillion going bust, not with a steady multi-billion pound stream of work coming its way - after all, the firm is one of the UK government's largest contractors.
And while I do think that a cash call in the not-too-distant future might well be needed, and if that happens we could see some significant dilution as a result, I'd be very surprised if the company will come even close to needing a rescue so drastic it would lead to that that feared wipeout.
Saying that, I can't see that any possibilities are off the table at the moment. When that profit warning was issued, Carillion told us that "all options to optimise value for the benefit of shareholders" were under consideration.
One such option might be a takeover, and the share price did pick up a little a few days ago on rumours that a buyout approach is in the pipeline.
Risky but tempting
Although there's a good chance Carillion could go either way from now, I see the odds of survival as a viable business with something worthwhile in it for current shareholders as being significantly better than 50/50.
The most likely outcome I see (and would hope for) is the serious offloading of non-core operations to help rebuild the balance sheet, coupled with a possible new placing to raise more much-needed cash, resulting in a slimmed-down core company.
And although it's risky, I'd consider investing a small amount for that hoped-for recovery.
Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.