How to identify cyclical company?

A cyclical company is one whose performance and profitability are heavily influenced by economic cycles. In other words, a cyclical company tends to perform well when the economy is growing, and its performance may decline when the economy is in a downturn. Here are some ways to identify a cyclical company:

Industry: Certain industries are more cyclical than others. For example, companies in the consumer discretionary sector, such as retailers and restaurants, are generally more cyclical than companies in the healthcare or utilities sectors.
Revenue patterns: A cyclical company's revenue pattern tends to follow economic cycles. For example, during an economic expansion, a cyclical company's revenue will tend to rise as consumers and businesses spend more money. Conversely, during an economic contraction, a cyclical company's revenue will tend to decline as spending decreases.
Sensitivity to interest rates: Cyclical companies tend to be more sensitive to changes in interest rates than non-cyclical companies. For example, companies in the housing or construction sectors are often affected by changes in interest rates because they impact consumer and business borrowing and spending.
Stock price performance: A cyclical company's stock price tends to perform well during economic expansions and may underperform during economic contractions. The stock prices of cyclical companies are often more volatile than non-cyclical companies.
Look at the company's beta: Beta is a measure of a stock's volatility relative to the overall market. Companies with betas greater than 1 tend to be more volatile and cyclical than the overall market.
Capital Expenditures: Cyclical companies tend to have high capital expenditures, particularly during economic expansions when they are expanding capacity to meet demand.

It's important to keep in mind that not all companies in cyclical industries are necessarily cyclical themselves. You will need to conduct further analysis to determine if a company is truly cyclical or not.

Comments

10 common mistakes in the share market by beginners

10 common mistakes in the share market by beginners:- Mistakes? way of learning. Always learn from your mistakes, take a responsibility of own mistakes and try to avoid it, it shows high morals of man. But in share market, one thing always keep in your mind that mistakes in share market never be forgiven. So it never be good to commit any error, always try to learn from others. Maybe after your own mistakes, you would not able to stand again. There are 10 very common mistakes in the share market by the beginners:- 1. Looking on stock market as a tool of making quick money:- Beginners enter in the share market with the mindset that “ share market is gambling and they can make quick money here ” it’s wrong mindset. They mix Gambling with share market that is not right and it dishonor the share market and create bad reputation on others mind. In the gambling you put your money in bets but in share market you invest on companies. And with some basic knowledge you will never lose. So ...

My Investments and Returns: April 2024 - March 2025

My Investments and Returns: April 2024 - March 2025 The Ground Rules Alright, folks, I’ve borrowed some of Warren Buffett’s genius ground rules from his famous letters—like borrowing your rich uncle’s best suit! I’m serving his wisdom with a sprinkle of my own goofy charm. Why? Because if you’re going to copy, go for the guy who buys companies like I buy snacks! Get ready for simple, Buffett-style tips that’ll make you feel like a money wizard—or at least fool your friends into thinking you are. Joke’s on them when you start sounding smarter than a stock market squirrel! Let’s roll! When we talk about yearly gains or losses, we mean market values—how our assets are valued at year-end compared to the start of the year. This may have little to do with realized results for tax purposes in a given year. Whether we do a good or poor job isn’t measured by whether we’re up or down for the year. Instead, it’s measured against the general performance of securities, like the S&P BSE Se...

How to invest in the share or stock market?

How to invest in the stock or share market? There are three ways through which you can invest your money in stock market. The sole purpose of investing is making profit, which investing style you adopted didn’t matter until and unless that style is not contrary to law like spreading false news in the market or pump and dump techniques. There are mainly two ways of investing style which broadly followed in the stock market (i) value investing (ii) growth investing. Except this, here one more investing style is, about this investing style we will talk in the last. Value investing:- Benjamin Graham known as the father of value investing. Although he never used value investing word. The book “ The Intelligent Investor ” best known for value investing. if you have taken your investing decision based on analysis of company’s balance sheet, profit and loss statement, cash flow statement and other ratios like P/E, EBITDA, Debt to equity etc. then you are value investor. Valu...

Vishal Bharadwaj

Search This Blog