Trade Like a Stock Market Wizard: How to Achieve Super Performance in Stocks in Any Market: How to Achieve Superperformance in Stocks in Any Market

by Mark Minervini

In purchasing a turnaround situation, you should look for companies that have very strong results in the most recent two or three quarters. You should see at least two quarters of strong earnings increases or one quarter that is up enough to move the trailing 12-month earnings per share to near or above its old peak. In looking at turnarounds, ask yourself: Are profit margins recovering, and are they at or close to the peak? Are the results based only on cost cutting? What is the company doing to increase earnings beyond cost cutting, productivity enhancements, and shedding losing operations? How much cash does the company have? Although a company can burn its cash, you can try to assess the burn rate and debt load to get an idea of how long it can last while running in the red.