As strange as this may seem, Yahoo! (NASDAQ:YHOO) is a turnaround story. It sounds odd because Yahoo! has grown annual sales 55% on average over the past five years and operates at the forefront of a verifiable growth industry -- online advertising. Yet Yahoo! has taken its eye off the ball in recent years, and profitability has fallen precipitously. Fortunately for investors, recent developments suggest that it's getting its mojo back, and the fact that it has fallen behind means it has even more to gain.

Recent quarterly results certainly speak to Yahoo!'s intent to return to its roots, but I'll readily admit that the changes have yet to bear fruit. This makes sense, because former CEO Terry Semel only stepped down in June after failing to reinvent Yahoo! as an online destination site. What instead occurred was Google's (NASDAQ:GOOG) meteoric rise to a leadership position in online search and its mastery of paid search with its AdSense program -- in stark contrast to Yahoo!'s reliance on banner display ads and fees garnered regardless of whether an ad was ever clicked on. Google's religious focus on developing the best technology also worked against Yahoo!

No wonder founder Jerry Yang returned as CEO, and his engineering background may prove just the right medicine to catch up with Google and stay ahead of Microsoft's (NASDAQ:MSFT) MSN network. It won't be easy, but signs are beginning to emerge that Yahoo! is building on earlier successes to monetize the millions of loyal users that log in to check their email and stock quotes. The jury is still out on Panama, Yahoo!'s latest advertising platform, but last quarter, the company was able to keep overall sales growth in the double digits. It is also focusing on establishing stronger international ties; it has a partnership with Telemundo and has been a major strategic investor in Chinese e-commerce company Alibaba and Yahoo! Japan.

Profitability has yet to improve much, but the company still generates strong cash flow. Plus, it was able to maintain more than $2 billion in cash and short-term investments on the balance sheet as of the most recent quarter. And to improve its margins, Yahoo! has been axing suboptimal parts of its business model while making small acquisitions.

The fact that almighty Microsoft may be preparing a buyout of Yahoo! tells me that there is definite appeal in the company for investors and strategic buyers. Sure, the valuation may be lofty to some, but growth companies rarely trade down to bargain-basement levels. Yahoo! remains one of a select few leaders in a fast-growing industry, and its recommitment to online advertising is comforting. At best, investors will see big stock gains as sales continue to grow in the double digits and profitability moves back to historic levels. At worst, a competitor swoops in to acquire Yahoo! on the cheap, which could also work out for holders of common shares.

Besides the uncertainty that comes with turning around a business, my only other real concern is that the current market malaise has marked down other online giants in their respective fields to appealing prices -- Monster Worldwide (NASDAQ:MNST) and eBay (NASDAQ:EBAY) come to mind. But I still think Yahoo! is one of the most interesting technology opportunities at current levels. 

When Yahoo! gets all its parts moving and making money efficiently, I find it hard to muster a scenario where Yahoo! stock doesn't trade up around 20% from current levels over the next couple of years. A company that commands the most page views globally, a second runner-up for domestic search, and an acquisition plan that leaps overseas seems like a winner.

You're not done with the Duel yet! Go back and read the other entries, sound off in CAPS, and then vote for the winner!

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Fool contributor Ryan Fuhrmann is long shares of Microsoft but has no financial interest in any other company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.