3 companies at 52-week lows: Are they a turnaround story?

Is the worst over for MaxiTRANS Industries Limited (ASX:MXI), Insurance Australia Group Ltd (ASX:IAG) and Metcash Limited (ASX:MTS)?

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There's nothing like a profit downgrade to ruin your day, and MaxiTRANS Industries Limited (ASX: MXI) shareholders have been hit with a particularly savage one in recent days.

It seems that tough trading conditions have been exacerbated since the half-yearly report was released back in June, and heavy discounting combined with rising costs caused by a falling Australian dollar have smashed profits.

After earning $5 million after tax in the first half (1H) of 2015 (down 50% on 1H 2014), profit guidance for the full year has been reduced to between $5.9 and $6.9 million.

In other words, it looks as though the company could earn as little as $900,000 in the second half of 2015. Don't get excited by the 10.8% trailing dividend yield either – dividends are also falling sharply.

There are positives in the form of a new MXI-operated trailer dealership and revenue growth in New Zealand, but given the negative outlook in its customer's sectors, I would caution investors to avoid MaxiTRANS shares at this point in time.

Insurance Australia Group Ltd (ASX: IAG) was already a cheap-looking stock before recent cyclone and storm claims in Queensland and New South Wales knocked the insurer down a peg or two.

Claims are expected to cost around $1 billion dollars and shares have traded even lower today on the news that insurance margins would be heavily impacted in the current year.

However with gross written premiums continuing to grow and a strong outlook for the insurance sector, IAG looks well placed to perform in future years.

Considering that shares trade on a Price to Earnings (P/E) of 10 and offer a ~6% fully franked dividend, I expect that IAG has fallen as low as it will go in the absence of further bad news, and indeed the insurer looks like a bargain for income-focused investors.

(Foolish analyst/writer Mike King warns that IAG's yield isn't the full story in his article here).

Finally, Metcash Limited (ASX: MTS) shares hit a 52-week low last Friday after a prolonged decline and a half-year report that was a tough pill to swallow.

The owner of the Super IGA supermarkets as well as chains of bottle-shops, hardware stores and automotive businesses has been crushed by market sentiment recently, with investors worried about margins amid competition from Wesfarmers Ltd (ASX: WES), Woolworths Limited (ASX: WOW), and an aggressive Aldi.

With even Woolworths feeling the squeeze it's apparent that the competition in the grocery sector isn't something that will be resolved overnight, and given that Metcash is in the middle of a major business overhaul I recommend investors stay on the sidelines until the future of the business becomes clearer.

Right now, razor thin margins and falling profits make this grocer too risky, even if it does offer a trailing 11.8% dividend (that is expected to fall).

Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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