Corporate Travel Management Ltd (ASX: CTD) shares resumed trading on 3 September. This came more than a year after the shares were suspended from the ASX.
Its shares were suspended for 13 months because the company couldn't complete its audited financial accounts while an investigation into its billing practices was underway.
The investigation found that the company had overcharged clients by more than $250 million. This included around £80 million relating to UK government contracts.
The stock last traded at $16.07 before the halt began in August 2025.
On their first day back, shares crashed a monumental 85%, and are now hovering around $2.13.
So is this a bargain buy, or simply too big of a risk?
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The bull and bear case
Despite the negative headlines, the underlying business is still performing reasonably well.
FY26 revenue rose to $670 million, and underlying EBITDA increased 36% to $114 million. The company also returned to a statutory profit of $17.7 million.
It also continued to win and renew large contracts, suggesting customers haven't abandoned the business.
However, the big risk is that the problems aren't completely behind the company yet.
Revenue also fell in July compared with the previous year, which raises questions about whether the business is actually recovering.
If the liabilities increase, customers leave, or it needs to raise more capital, shareholders could suffer further losses or dilution.
On the other hand, if Corporate Travel Management finishes the repayments, avoids further problems, gets a clean audit opinion and returns to growth, the current share price could prove very cheap.
In simple terms, it is potentially a good business at a distressed price. But buying it now is a high-risk bet that the worst is over.
What is Morgans saying?
In a note out of Morgans this week, the broker said it believes Corporate Travel Management is a "turnaround story under new leadership."
Following years of overcharging clients, it will refund them A$246m by 30 September 2027, supported by its new A$175m debt facility.
FY27 guidance will be provided at the AGM. We forecast earnings to fall materially due to a higher AUD, reduced special project work and higher corporate costs. Earnings growth should resume from FY28 given new management's strategy. The acceleration of new client wins in the first two months of FY27 is encouraging. Given what has gone on, it will take time for confidence to rebuild and risks remain. However, we think CTD is a turnaround story under new leadership with material upside potential if it executes. We resume coverage with a BUY and A$3.06 PT.
From the current share price, this indicates an upside potential of over 40%.
Foolish takeaway
Corporate Travel Management is a high-risk turnaround investment. While the underlying business shows signs of recovery, significant customer liabilities, a modified audit opinion, and weakening recent revenue leave the company financially uncertain.
Investors are effectively betting that no further major problems emerge and that it can resolve its liabilities and return to sustainable growth.
But if that doesn't happen, further losses or shareholder dilution are possible.
