Valuing Businesses In Cyclical Industries

Abstract

Given the potential sensitivity of business values to industry business cycles, it is imperative that valuators consider business cycles when executing valuations of firms that tend to be sensitive to these industry-level fluctuations. Failure to consider earnings cycles in industries where they are significant can result in extreme over and undervaluation of business enterprises. The methods presented in this paper can help a valuation professional to utilize industry cycle information to dramatically improve the quality of value estimates.