Through-Cycle Price Target
For cyclicals, spot EPS lies — it's sky-high at the peak and negative at the trough. The honest target is normalized EPS times the multiple the market pays through the cycle. Set a bear / base / bull for each, weight them, and get one blended target with the full range.
Scenarios
Through-cycle (normalized) EPS × recovery multiple = scenario PT. Probabilities should sum to 100%.
| Scenario | Norm. EPS ($) | Multiple (×) | Prob (%) | Price target | Upside |
|---|---|---|---|---|---|
| Bear | — | — | |||
| Base | — | — | |||
| Bull | — | — |
Probability-weighted price target
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Expected value vs. current
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How it works
Normalize, don't annualize. A cyclical at the peak shows enormous EPS that won't persist; at the trough it can show losses. Through-cycle EPS is the mid-cycle earnings power — what the business makes in an average year across the whole cycle.
The recovery multiple. Multiply normalized EPS by the P/E the market historically assigns through the cycle (for memory, ~11×). Do it three times — bear, base, bull — to bound the EPS and the multiple uncertainty, then weight by probability for one blended target.
Why blend. A single point target hides the distribution. The probability-weighted PT is the expected value; the bear→bull range is the risk you're underwriting. Pre-commit your trim ladder against the bull and your exit against the bear. Pair with the reverse DCF to cross-check what price already implies.
Defaults illustrate a memory-cycle thesis (≈11× recovery multiple). Nothing here is investment advice. Built by Brandon Leon — independent research focused on cyclical industries.