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My understanding is that the PE for a company that is cyclical is a predictor of future earnings. Although KEM has phenomenal (record-breaking) earnings now, that is 'only' because unit volume is high and unit prices are also high because of a shortage of capacitor making capacity. The low PE predicts that unit prices will return to normal levels when more capacity comes on-line, or demand lessens. Then the earnings will fall, and since that is the denominator of the PE, the PE will rise.

Does that make sense? OK, explain to me who exactly understands the industry well and is predictively modeling the supply and demand: stock market analysts? the 'market' ?

Recent history: back in the spring, KEM was in the high 20's, there were long lead times (many backorders) for certain components, and many pundits expressed the same amazement that you do about the low PE and so forth. Then the recession kicked in, inventories of certain electronic products built up (PC's and network switches?), and a few stock analysts downgraded component makers like KEM. Meanwhile, the price of the raw materials, tantalum, went through the roof, and KEM decided to go vertical, investing in a new (pilot plant stage) tantalum mining operation.
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