Industry Life Cycle Analysis

Definition of 'Industry Life Cycle Analysis'


A form of fundamental analysis involving the process of making investment decisions based on the different stages an industry is at during a given point in time. The type of position taken will depend on firm specific characteristics, as well as where the industry is at in its life cycle.

Investopedia explains 'Industry Life Cycle Analysis'


Under the production and market introduction phases, revenues and earnings are likely to be very low, which makes investments during these phases more speculative in nature. Revenues and earnings are likely to be low because there is little demand for the product, or the product is not completed. Expenses are likely to be very large during these phases as a company or industry spends a lot on marketing and research.

Through the growth phase, revenues and margins are likely to be on the rise due to an increase in demand for a product and the pricing power the firm has due to a small number of competitors. Stock prices are likely to rise during this phase.

During the maturity and stability phase, revenues and margins are likely to decline due to lower sales demand and more competition. Stock prices are likely to decline during these phases.



comments powered by Disqus
Hot Definitions
  1. National Best Bid and Offer - NBBO

    A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities.
  2. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
  3. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
  4. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
  5. Jeff Bezos

    Self-made billionaire Jeff Bezos is famous for founding online retail giant Amazon.com.
  6. Re-fracking

    Re-fracking is the practice of returning to older wells that had been fracked in the recent past to capitalize on newer, more effective extraction technology. Re-fracking can be effective on especially tight oil deposits – where the shale products low yields – to extend their productivity.
Trading Center