4 Turnaround Stocks to Buy Before 2026 Is Over and Hold for a Decade

Welcome to the recovery ward.

Every stock market has a space where battered companies and stocks try to get back on their feet. It smells faintly of hand sanitizer and regret, and it's packed with companies that face-planted in public and then spent a long time apologizing for it.

I took a stroll through the software wing of Wall Street's ward this week, and four patients caught my eye. Each stock took a real beating in recent years. But that doesn't necessarily mean the businesses are busted. Each one grew revenue by at least 18% in its latest quarter, compared to the year-ago period. And the market hasn't given up on them -- all have rallied at least 38% over the last six months as of Oct. 16.

Some are still hooked up to the monitors. Others are already doing laps around the parking lot. I don't know if every single ticker will make it in the long run, but a couple of winners can make up for more than one fizzled turnaround bet.

So here's the tour of the recovery ward, starting with the patients in the roughest shape.

Bed 1: Duolingo, the owl with a broken wing

Duolingo (NASDAQ: DUOL) knows a thing or two about guilt trips. Its famed mascot has been nagging people about missed Spanish lessons for years.

Lately, the market has been returning the favor. The stock is down 57% over the past year and is stuck 59% below its 52-week high.

The vital signs look better than the stock chart, though. Revenue grew 18.3% in the latest quarter, and Duolingo's stock has climbed 41% over the last six months. The company is leaning on AI-driven premium subscription tiers and branching out into subjects beyond languages. Meanwhile, the stock trades at just 17 times trailing earnings, largely because investors worry about AI-powered threats and a management team prioritizing the user experience over immediate profits.

17 times earnings is a bargain-bin price tag for a business still growing at a double-digit clip. Duolingo also shows exactly the attitude I want to see steering the companies I own with a long-term mindset.

The skeptics haven't left the building. About 18% of Duolingo's float is sold short, so plenty of folks are betting the green owl stays grounded. If the next few earnings reports keep impressing, those short-sellers could be in for a very uncomfortable lesson.

Bed 2: Monday.com, with a stubborn case of the Mondays

Monday.com (NASDAQ: MNDY) shares have had a case of the Mondays for roughly 12 months straight. The stock is down 49% over the past year and 57% below its 52-week high, reducing the company's market cap to just $3.8 billion.

That's a strange situation for a business that just grew revenue 21.9% year over year. Somebody out there is still buying an awful lot of project boards, rather than hoping that Claude or ChatGPT can do the same job cheaply. Monday.com's stock has quietly bounced 38% over the past six months, and at 38.3 times earnings, it's no longer priced like a high-flying growth darling. It's closer to a growth stock sitting in the penalty box.

Like Duolingo, Monday.com has drawn a large crowd of short-sellers, with 16% of its float shorted. A few more quarters of steady growth could get this one out of the low-multiple penalty box in a hurry.

Bed 3: Unity, back on its feet after a self-inflicted injury

Unity Software (NYSE: U) earned its spot in this ward the hard way. In 2023, the game-engine company tried charging developers a fee every time someone installed their games. Developers responded about as warmly as you'd expect to this monetization move. Unity's CEO stepped down and the stock went into a long tailspin.

Then the doctors showed up. Former Red Hat boss and current Silver Lake partner Jim Whitehurst steadied the ship as interim CEO and rightsized the cost structure. Former Zynga COO Matt Bromberg took the top job in May 2024. The hated install fee got scrapped, and Unity refocused on its core engine and advertising businesses.

The recovery is showing up in the numbers. Revenue grew 23.9% in the latest quarter. The stock is up 54% over six months and 15% in the past year. It's also still 23% below its 52-week high. Whitehurst's celebrated fiscal discipline seems to have rubbed off on Unity for the long haul.

Unity is out of bed and walking the halls, with some unfinished business left on the chart.

Image source: Getty Images.

Bed 4: GitLab, the patient who ran a marathon on discharge day

There's always one patient who gets discharged and immediately signs up for a triathlon. Meet GitLab (NASDAQ: GTLB).

The DevSecOps specialist helps software teams build, secure, and ship code in one place. The stock got knocked around hard during the enterprise tech sell-off. Then it woke up. GitLab's stock has soared 145% over the past six months, rising 180% above its 52-week low. Revenue grew 21.3% in the latest quarter.

GitLab is only 10% below its 52-week high, so this isn't exactly a hidden bargain anymore. At the same time, it's down 60% from its all-time high, shortly after the IPO in 2021.

This patient already proved the treatment works. Enterprise users are signing up and AI agentic workflows are a real selling point. The real question for long-term investors is whether this $8.7 billion company can keep up the pace for years, not months. I think it can.

Anders Bylund has positions in Duolingo. The Motley Fool has positions in and recommends Duolingo, Monday.com, and Unity Software. The Motley Fool recommends GitLab. The Motley Fool has a disclosure policy.