Normalised earnings
Also called: mid-cycle earnings, normalized earnings
An estimate of what a cyclical company earns in an average year across a full cycle, used instead of peak or trough profit.
Normalised earnings use average volumes, prices or margins across a cycle. Valuing cyclical and commodity companies on them avoids the trap of low multiples at peak profit and meaningless multiples at the bottom.
Learn more in these lessons
- Commodity businessesHow do you analyse a company that sells a commodity?
- Choosing a valuation methodWhich valuation method suits which kind of company?
Related terms
Spotted a mistake or something unclear? Report it by email. Here is how corrections work.