One outsourcing turnaround stock I’d sell and one I’d buy

One of the most important things investors can do is hold their hands up and admit their mistakes.

And Carillion (LSE: CLLN) was a howler for me. Afew months ago I liked the look of forecast dividend yields of around 8.5% after the shares had lost a third of their value in two years. I was aware of the risks, but thought there was room for a dividend cut while still offering decent value.

I did not expect a complete suspension of the dividend. Orthe resulting 66% share price fall to 65p.

But thats what happened after a profit warning on 10 July, with the dividendsuspended to save 80mafter a failure to meet half-year expectations, and now with the expectation of missing full-year forecasts. And chief executiveRichard Howson has resigned.

Theres going to be a provision of 845m hitting the books, and net borrowing is likely to climb to 695m. Thats a fair old whack for a company with a market cap of just 293m, and it renders the now single-digit P/E multiples meaningless (even if they werent based on pre-shock forecasts).

Im not buying

The big question is whether Carillion is an oversold bargain now, or a rapidly descending cutting tool.

The news is actually not all bad, with some of the problem down to the timing of now-delayed Public Private Partnerships equity disposals. And the company is apparently progressing well on its cost-reduction strategy and has been winning some new contracts.

But the shock, combined with the seriousness of the firms reaction and that scary debt level, leaves me feeling there could be worse to come before things improve.

A more attractive option

Im going to stick my neck out now and say I like the look of another outsourcing firm, whilehoping my favouring it does not sound another death knell. This time its Aggreko (LSE: AGK), a company which providesrental power, temperature control and compressed air systems.

The firms specialisation should, I reckon, provide a more defensive proposition than Carillions more general construction services, with customers less likely to look to competitors or to do it themselves in the current challenging business environment.

Aggrekos share price has fallen, losing 66% since a peak in September 2012 but it has stilleasilybeaten the FTSE 100 over 10 years, with a gain of 49% compared to just 19% for the index.

The share price slump followsfour years of crumbling EPS, witha further 6% fall on the cards for 2017. But a 12% rise pencilled in for 2018 would drop the P/E to 13, with a 3% dividend yield.

Is thedividend at risk?

Net debt at December 2016 stood at 649m, but this is a much larger company with a market cap of 2.2bn and annual revenue of 1.5bn, and by that comparison I dont see a problem.

Forecasts for 2018 suggest a PEG ratio of 1.1, and while thats not low enough to look like a sure-fire hit with growth investors,I think its actually quite attractive.

I also see Aggreko as being in the tail-end of its down spell and starting up the other side, while I fear that Carillion still has a deeper hole to dig.With sentiment poor, it could take time for an Aggreko share price recovery to happen, but I see a buying opportunity now.