Cyclicals earn a lot at the top of a cycle and little or nothing at the bottom. That produces a famous trap: they look cheapest on pe-ratio exactly when earnings are peaking, and most expensive when earnings are near the trough and about to recover.
Traders pay more attention to pmi, rate expectations, and order backlogs than to trailing earnings here. Cyclicals also show the clearest sector-rotation behavior as the market changes its view on growth.
Example: an automaker earns $8 a share at the cycle peak and trades at $56, a P/E of 7. Two years later earnings fall to $1 and the stock at $30 shows a P/E of 30 while being 46% cheaper.
Related: defensive-stock, sector-rotation, pe-ratio, pmi