# Cyclical Stock Risk

## User question

> A steel or coal stock has a very low PE ratio. Does that mean it is undervalued?

## Recommended skill

```text
biga-cyclical-skill/SKILL.md
```

## Example output

```markdown
# Cyclical Stock Low-PE Risk Check

## 1. Earnings cycle position

- Is the low PE based on peak earnings?
- Are commodity prices, spreads, or margins already at historically high levels?
- Could future earnings fall even if the current valuation looks cheap?

## 2. Supply and demand

- Is demand driven by real end consumption or short-term restocking?
- Are new capacities coming online?
- Are inventories rising or falling?

## 3. Balance sheet resilience

- Can the company survive a down cycle with its current debt level?
- Are interest expenses, short-term debt, or refinancing risks increasing?
- Are there impairment risks in fixed assets, inventory, or projects under construction?

## 4. Capital allocation risk

- Is management expanding aggressively near a cyclical peak?
- Are acquisitions or new projects priced with optimistic assumptions?
- Is the dividend sustainable if commodity prices fall?

## 5. Decision discipline

- Write down the cycle thesis before acting.
- Define what evidence would prove the thesis wrong.
- Avoid using low PE alone as the investment reason.

> This is for investment research and education only. It is not investment advice.
```

## Boundary note

This example explains cyclical risk and does not recommend buying or selling any stock.