This is a random thought and theory on how to evaluate and price stocks. It might have majors flaws and I have not done any back testing to certify the credibility and performance. Hence, the title of "random" and I wish to stimulate discussion amongst readers.

As I was sitting through a lecture, I suddenly had a thought of valuing companies by taking either their accounting averages in a business cycle or during their normalized performance year.

Assuming that the company production capabilities and maintains competitiveness, the company should always "bounce back" to normalized rate of operations once the industry or market revitalizes. As such, this might be a more effective of evaluating companies that are the market leaders operating in a down market, since history suggests that almost all markets will trend back to where it declined. Certain industries that are dealing with necessities such as utilities, transportation and ......