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.

BREAKING DOWN '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.

RELATED TERMS
  1. Phase 2

    The second phase of clinical trials or studies for an experimental ...
  2. Phase 1

    Phase 1 clinical studies or clinical trials are focused on the ...
  3. Spending Phase

    The period in a person's life following retirement in which earning ...
  4. Consolidation Phase

    A stage in the life of a company or an industry in which components ...
  5. Stock Cycle

    The evolution of a stock's price from an early uptrend to a price ...
  6. Gifting Phase

    The stage in an investor's life where he or she seeks to use ...
Related Articles
  1. Active Trading Fundamentals

    Dow Theory: The Three Phases Of Primary Trends

    By Chad Langager and Casey Murphy, senior analyst of ChartAdvisor.comSince the most vital trend to understand is the primary trend, this leads into the third tenet of Dow theory, which states ...
  2. Bonds & Fixed Income

    Bonds: They're Not Just For Seniors

    In this article, we'll show you how investors at any stage of life can keep these fixed-income investments. Keep Reading.
  3. Markets

    Great Company Or Growing Industry?

    Look at the big picture when choosing a company - what you see may really be a stage in its industry's growth.
  4. Stock Analysis

    3 Sectors ETF Investors Should Buy And Hold For The Mid-Cycle Expansion

    The seemingly endless tug of war between the bulls and bears on Wall Street can be frustrating for even the most patient investors, which is why arming yourself with knowledge about how previous ...
  5. Retirement

    What Is a Phased Retirement and How Do I Get One?

    Workers around the country are redefining what retirement looks like. One way is a phased retirement, in which you gradually exit the workforce.
  6. Fundamental Analysis

    Sector Rotation: The Essentials

    We look at how the market signals impending economic cycles and sector performance during each stage.
  7. Investing Basics

    Revenue Projections Show Profit Potential

    Examining how a company makes money can offer clues about its earnings potential.
  8. Fundamental Analysis

    Trading With Stage Analysis (NRG, NKE)

    Stage analysis offers market participants a powerful tool to identify current market conditions and make rapid adjustments to strategies.
  9. Stock Analysis

    Should You Buy This 3-D Printing Stock?

    There are often two phases in the trajectory of a hot stock. The first phase is when growth prospects are pushing shares higher.The second phase comes when momentum investors take over and keep ...
  10. Investing

    Capital Intensive Companies: What Are The Pros & Cons for Investors?

    Learn about the pros and cons of investing in capital-intensive industries. Find out how barriers to entry and mature industries impact investment outlook.
RELATED FAQS
  1. What happens during the spending/gifting phase of an investor's life cycle?

    The final phase(s) in an investor's life cycle is the spending/gifting phase, during which wealth accumulated over many years ... Read Answer >>
  2. What phase of the economic cycle tends to be strongest for companies in the Internet ...

    Learn which phase of the economic cycle features the best performance for the Internet sector and how portfolio managers ... Read Answer >>
  3. When during the economic cycle should an investor buy into the aerospace sector?

    Learn why the expansionary phase of the economic cycle is the best time to invest in the aerospace sector and how to use ... Read Answer >>
  4. When during the economic cycle does the financial services sector perform most strongly?

    Find out how some investors use the economic cycle to develop a sector rotation strategy. Find out where financial services ... Read Answer >>
  5. Is maximizing stock price the same thing as maximizing profit?

    Simply put: yes. A company's stock price will factor in many different variables including the type of industry the firm ... Read Answer >>
  6. What stage of the economic cycle is usually the best for an investor to enter the ...

    Learn how savvy investors employ sector rotation to gain from the electronics sector during expansion and avoid losses during ... Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center