High P/Es on depressed EPS at the bottom of the cycle and low P/Es on unusually high EPS at the top of the cycle reflect the countercyclical property of P/Es known as the Molodovsky effect.
However in Q58 Mock PM afternoon, why is this the correct answer, The question says its relative valuation, so I am assuming all the peers (same industry) will have either inflated P/E or Depressed P/E. What’s the need to adjust them?