2 top turnaround stocks that could make you a millionaire

Would you invest in a gold miner that's not making any profit? That's the situation with Hummingbird Resources(LSE: HUM), but it's nothing to worry about -- it's because the company hasn't actually produced any of the shiny stuff just yet, but it's on the brink of it.

Hummingbird has been developing its Yanfolila gold project in Mali, and it's on schedule and within budget with first gold pour expected by the end of 2017. And in Wednesday's first-half results announcement, there were plenty of indications that the firm should make it through to profitability just fine.

Following the acquisition of 5% of the Yanfolila project from a minor firm that held an interest, Hummingbird now owns 80% of it -- and the Mali government has upped its stake to 20% for an investment of $11m. In addition, there was approximately $60m in cash on the books at 1 September, though there's a fair bit of debt too.

Turnaround

We've had years of losses building up to this expected first year of gold production, and there's a further loss on the cards for the full year this year -- a modest 1.36p loss per share is forecast.

But that should swing around in 2018, with analysts predicting EPS of around 3.2p per share . That would put the 32.25p shares on a P/E multiple of only around 7.8 -- barely more than half the FTSE 100's long-term average.

While we're in an economically uncertain phase I don't see much risk of a gold price fall. But politics could be a problem -- the military coups in Mali in 2012 suggest anything could happen in the coming years.

But gold is gold, and Hummingbird could be a good way to get in on it.

Road to recovery?

K3 Business Technology Group(LSE: KBT) is a stock that I think could be set for a turnaround of a very different nature. The company provides end-to-end business software systems for the retail, manufacturing and distribution sectors, and its shares were climbing nicely -- they reached more than 350p in late 2016.

But a couple of profit warnings -- the most recent on 16 May this year -- sent the price nosediving, and we're looking at just 159p as I write. The company failed to secure some major deals it was expecting, and May's announcement told us that results would be "significantly below current market expectations."

We had those results Wednesday. They revealed an adjusted pre-tax loss for the 12 months to 30 June of £2.63m (from an adjusted profit of £8.8m a year previously) and an adjusted loss per share of 7.4p (against previous EPS of 23.5p). Net debt stood at £6m.

Recovery prospects

But I'm seeing encouraging hope for recovery, with the company already changing its strategy "for a return to profitability and sustainable growth." That includes focusing on the SME market and its own products, and looking for recurring income. There's an ongoing review of the firm's resources too, and reorganisation has produced annualised savings of around £3.7m already.

The firm's year-end is changing to November because of its strong seasonal trading, and analysts are actually expecting to see EPS of 18p, which would give us a P/E of around nine -- but a big fall pencilled in for 2018 would drop EPS to only around 8p and drive the P/E up to 20.

But K3's rapid response makes me think that's too pessimistic.

Snagging future cash

Investing in strong company turnarounds can be a great step on the road to financial security.

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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.

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