Markets · 6 pages · 12 min

Why this year's earnings can be the wrong year

In a cyclical business, this year's earnings may be a peak or a trough rather than a typical year.

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From the opening

This year's earnings can be the wrong year to treat as normal when the firm rides a cycle and the year sits at a crest or a trough. Using that year as the lasting picture freezes a phase and calls it the firm's ordinary earning power. The opening covers peaks stack volume and price, troughs stack idle capacity, and credit booms distort the year.

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Inside

Peaks stack volume and price
Troughs stack idle capacity
Credit booms distort the year
Compare with prior phases
Where the idea stops applying
A distinction worth keeping

Sources

Cyclical peak and trough earnings
Mid-cycle earning power

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Why this year's earnings can be the wrong year

From the opening

Inside

Sources

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