For the purpose of performing a relative valuation a cyclical industry, the most appropriate price multiple is?
- price to earnings using trailing --> I understand this must not be the answer
- Price to Book value
- price to earning using normalized earnings --> this is the answer
I understand that normalized earnings can solve the cyclical problem but why it is better than PB? because in my point of view, Book Value is also unaffected by cyclical problem.
Beside, I saw that Price to Sales is also good to cyclical industry, why? Sales is also affected correlated with net income!