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Estimating mid-cycle, normalized earnings with Alex Fitch and Michael Nicolas from Harris Associates (Oakmark Funds)

The JRo Show

CHAPTER

Evaluating Mid-Cycle Normalized Earnings and Valuation Multiples

This chapter explores the methodology behind estimating mid-cycle normalized earnings and the considerations regarding the price to earnings multiple used to capitalize those estimates. It discusses the impact of growth and incremental returns on the PE ratio, comparing valuation multiples from DCF analysis with public comps, and the benefits of normalizing earnings for cross-industry comparisons.

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