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Alcatel-Lucent's (NYSE:ALU) CEO Michel Combes was not kidding when he said if the company does not lay off 10,000 people it might collapse. If one looks at the company's balance sheet, it barely has any shareholders equity at all.

ALU Shareholders Equity Chart
(Click to enlarge)

ALU Shareholders Equity data by YCharts

In addition, revenues have been in a downward spiral for several years now. As you can see, it looks like a stock chart with lower lows and lower highs.

ALU Revenue Quarterly Chart
(Click to enlarge)

ALU Revenue Quarterly data by YCharts

On top of that, the company is on thin ice as far as working capital. For a company that does about $19 billion in revenue per year (trailing figures), $3.5 billion in working capital is not a whole lot of breathing space.

ALU Total Current Assets Chart
(Click to enlarge)

ALU Total Current Assets data by YCharts

I had been bullish on ALU since November of last year. Then around February of 2013, when talk surfaced that the French government might take a stake in the company, I pulled the plug.

Talking about bad timing, the stock has doubled since then. However my fears about the company have not changed much since then. I still think that the company's balance sheet remains very weak.

The question however is what do investors do today?

Personally I don't see too many reasons to buy the stock today, besides that another restructuring might actually turn the company around this time.

And while the market usually gives the benefit of a doubt to a turnaround stock, there are limits to the markets generosity. Please remember that the company does not have much breathing space. Also remember that the company has been losing money every year since the Lucent acquisition of 2006. In other words, it does not have a good track record.

My biggest fear is that the French government might decide to take a stake in the company via a private placement of common stock, and thus dilute current shareholders. And while the market does not seem to be worried about such an outcome at the moment, it is something investors need to keep in mind.

When I started covering Alcatel-Lucent it was around $1 a share. Today it has more than tripled. While I did lose the ride up, my initial thinking that ALU might be a multi bagger stock played out.

However while the stock has tripled, the company has not turned around and the company remains financially very weak. And while there might be more upside to the stock, I don't think it's much and holding on to the stock will definitely not get you another triple bagger.

And for my money, if you want to invest in a turnaround stock, there are many other stocks out there with problematic balance sheets that might offer better returns.

Source: Alcatel-Lucent Has Not Collapsed Yet, But It Might Not Take Much