Cyclical
Companies whose earnings swing with a commodity price, a capital-spending cycle, or the broader economy.
Through-cycle EV/EBITDA and mid-cycle FCF anchor valuation. We avoid extrapolating peak earnings; quality flag is balance-sheet resilience at trough.
Cyclical companies' earnings rise and fall with a commodity price, a capital-spending cycle, or the broader economy. The danger is the oldest one in the book: a deceptively low trailing multiple at the top of the cycle and a frightening one at the bottom, which lures momentum buyers into peak earnings.
We normalize earnings across the full cycle rather than anchoring on a single year, and we watch the capital cycle — who is adding capacity, who is starving it — as closely as the income statement, because supply discipline usually matters more than the current spot price.
The questions that move the call for a cyclical — applied consistently across every name in the archetype.
Mid-cycle earnings
What does this business earn on average through a full cycle, not at the current point in it?
Position in the cycle
Are we nearer a trough or a peak — and is the capital cycle adding supply or rationalizing it?
Balance-sheet resilience
Can the company survive the trough without dilution or distress? Leverage is the difference between patience and forced selling.
Dividend coverage at lows
A payout that looks safe at peak earnings may not be; we test it against normalized, not current, cash flow.
Example reports
How the archetype lens reads in practice — free to open in full.