Mid-cycle earnings

The profit a cyclical business earns in a typical year rather than at a peak or a trough.

A commodity producer earning ₹1,200, ₹400, ₹800, ₹1,600 and ₹600 crore over five years has mid-cycle earnings of about ₹920 crore.

Using a normal-year figure is what stops the standard cyclical error, which is buying at a low multiple of peak earnings and selling at a high multiple of trough earnings.

Better still, build the figure: normal capacity utilisation multiplied by a normal spread, which can be defended against the industry's own history.