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Cyclical Company

A cyclical company is a company whose business performance and stock price tend to follow the economic cycle. Cyclical companies experience higher revenues and profits during economic expansions and lower performance during recessions. Industries such as automotive, construction, and travel are considered cyclical because they are highly sensitive to changes in consumer demand and economic conditions.

Example

An automotive company sees increased car sales during periods of economic growth but experiences a decline in demand during a recession, reflecting its cyclical nature.

Key points

• A cyclical company’s performance is closely tied to the economic cycle.

• Revenues and profits rise during expansions and fall during recessions.

• Industries such as automotive, construction, and travel are examples of cyclical sectors.

Quick Answers to Curious Questions

A cyclical company is one whose performance fluctuates in line with the broader economy, doing well during growth periods and declining during recessions.

Industries like automotive, construction, travel, and luxury goods are typically cyclical, as their demand is closely tied to economic conditions.

Cyclical companies tend to see a decline in revenues and profits during recessions, as consumer demand for their products or services decreases.