The market has continued to cool on the prospects of embattled education provider Vocation Ltd (ASX: VET) after the stock surged as a result of the appointment of a new CEO.
Shares of the company surged nearly 160% from 8.1 cents to 21 cents in the three days following the announcement that outgoing CEO Mark Hutchinson would be replaced by Stewart Cummins. Cummins has a strong reputation for his ability to guide corporate turnarounds, which is very fitting for Vocation as it is still dealing with the aftermath of the loss of key funding from the Victorian government last year.
Unfortunately, it's been all downhill since then with the stock having retreated more than 40%. It's now trading at 12.5 cents, down 7.4% today alone.
While some investors will see this as an opportunity to buy a rundown stock in the hope of a major turnaround, it's worth remembering Warren Buffett's famous words: "Turnarounds seldom turn."
Sure, Vocation appears to be taking the necessary steps in getting its business back on track by selling 'non-core' businesses and reducing its debt. But it remains unclear just how the company will perform in its simplified structure.
Although investors could make a nice quick profit if everything goes according to plan, Vocation remains a highly risky investment prospect which should certainly be avoided by long-term investors – at least until they have been provided with greater clarity on the business' future.
