Here’s a disturbing thought for investors: More companies have failed than succeeded.

Not just by a little bit either. The Bureau of Labor Statistics estimates that, across all sectors, less than half of all new companies were still in existence only four years later. That’s not even including small mom-and-pop operations.

Fortunately, by the time most companies are large enough to go public, their viability usually isn’t in doubt.

Alas, there are exceptions. Many companies face limits to their growth. They might not keep up with the latest technological changes. Their financial condition may decline. Then their survivability comes into doubt.

While it’s rare for a company that was once high-flying and successful to swing back from the brink of failure, it happens. And investing in these turnarounds, as with any other investment, can have its risks and rewards.

Let’s start with the risk. The biggest risk with a turnaround is that the company will fail to turnaround and fall into bankruptcy.

For example, Pan-American Airlines, long a status symbol in the mid-20^th century, had difficulty dealing with the world of airline deregulation.

That’s because Pan-Am used the opportunity to acquire competitors outside its core market. In doing so, the airline overextended itself financially. The company went bankrupt in 1991.

Among current investment opportunities Sears Holdings (SHLD) has been considered a turnaround play since being bought by hedge fund manager Eddie Lampert and merged with K-mart. Alas, Sears doesn’t have the scale advantage enjoyed by companies like Target, Costco or Wal-Mart. Nor does it have consumer loyalty.

Despite slashing costs, eliminating poorly-performing stores and other signs of a turnaround, growth has remained stagnant. This is one stubborn turnaround play, and the company could very well go under for good.

As for rewards, a company in the midst of a turnaround often trades at a price and valuation level that offers some great upside… at least as long as the turnaround can succeed.

For example, consider Cisco (CSCO) as a turnaround play. Shares are still down nearly 20% from where they were a year ago. But the company has turned around. Profit margins and efficiency have improved, workers have been laid off, a dividend has been established.

Best of all, Cisco remains one of the dominant players in networking technology. A pile of $30 billion in net cash (cash minus debt) doesn’t hurt either.

Cisco stands out amidst other turnaround opportunities. It has a financial advantage relative to other struggling companies, and an industry advantage.

Investing in turnarounds isn’t that different from investing in any other company. Some will win big, and some will lose big. But look for signs that a company can make it will improve your chances of success.