INVESTMENT FOCUS-History suggests Volkswagen shares may struggle to bounce higher

* Volkswagen (LSE: 0P6N.L - news) near 2016 highs ahead of next week's earnings

* Analysts turn more positive on the stock

* BP, Olympus remained well below pre-crisis levels, one year on

* Graphic: when blue chips stumble http://reut.rs/1NULzZP

* Graphic: Volkswagen performance vs peers http://reut.rs/1Uaad5J

By Alistair Smout

LONDON, May 27 (Reuters) - Volkswagen shares are near their 2016 high and valuations have rebounded after last year's emissions scandal but experience of previous corporate crises suggests a full recovery will take time.

With (Other OTC: WWTH - news) first-quarter earnings due on Tuesday, shares in the German automaker are up more than 50 percent from lows hit in October following revelations that it had cheated diesel emissions tests.

A U.S (Other OTC: UBGXF - news) . judge said on Tuesday that Volkswagen had made substantial progress toward reaching a final settlement with car owners and the U.S. government, for which the company has set aside $18 billion while warning the bill could rise.

But the history of corporate crises -- including Michael Woodford's 2012 ouster from Olympus and BP's Gulf of Mexico oil spill in 2010 -- suggests Volkswagen could be feeling the effects of "Dieselgate" for a long time to come.

Eight months after evidence of Volkswagen's rule-breaking emerged, its share price has caught up with some peers, but analysts warn the firm is not out of the woods yet.

"It (Other OTC: ITGL - news) will take years to recover, in terms of the stock price, sorting out all the fines, and the reputation. Analysts are struggling to assess what the damage actually is, as there's still a steady corrosive drip-drip of news," said Mike Ingram, market analyst at BGC Partners (NYSE: BGCA - news) .

"Yes, they've bumped up their provisions, but you have to wonder whether they're prepared for a moderately bad outcome, let alone a "worst-case" scenario."

Shares (Berlin: DI6.BE - news) in both BP and Olympus remained below pre-crisis levels a year after their respective scandals broke and Volkswagen shares are still some 20 percent below their early-September level.

A Reuters poll expects operating profit to fall 17 percent when the carmaker reports first quarter earnings next week.

CAUTIOUS OPTIMISM

There are signs, however, that investors are beginning to take a more positive view of the stock. The higher share price has also restored VW's valuation to its five-year median of 7.3 times forward earnings, in line with the sector average.

Rather than being deterred by this higher valuation, some analysts are raising their own ratings on the stock, having slashed them in the aftermath of the crisis.

Analysts are more optimistic than at any time since the scandal first broke last September, with only five "sell" ratings on the stock and three "strong sells", according to Thomson Reuters Eikon data.

That is the lowest number of analysts to hold a sell rating on VW in eight months, although there were no more than five sell ratings on the stock at any time in the 12 months before the scandal and no analyst rated it a sell in August 2014.

Analyst Klaus Breitenbach at Baader Bank (Xetra: 508810 - news) in Frankfurt lifted his rating on Volkswagen to "hold" from "sell" this week, citing the progress made in reaching a deal with the U.S. authorities.

"It will be a relief for the investor community if there is a settlement in the United States and we know the final number (including potential fines and how many cars will be fixed or repurchased)," he said.

He remains cautious on the outlook for the stock, however, warning that further losses from the scandal are possible even after the final cost of U.S. fines and compensation is tallied.

"I'm not sure if I could become positive on the stock ... because even if they settle in the U.S., there is still a risk in what's happening outside ... That risk is still there," Breitenbach said.

(Graphics by Vikram Subhedar and Alistair Smout; Editing by Catherine Evans)