Valuation models using average price ratios and 10-year averages can be more useful with cyclical companies because valuation of cyclical companies benefit from an analysis of longer time periods including at least one business cycle.

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Cyclical companies tend to have fluctuations in revenues, profits, and cash flows due to changes in economic conditions and business cycles. Therefore, using average price ratios and 10-year averages can smooth out these fluctuations and provide a more accurate representation of the company's valuation. Additionally, analyzing at least one business cycle can provide insights into the company's performance during both upturns and downturns, which can be useful in making investment decisions.

Valuation Models Using Average Price Ratios and 10-Year Averages Can