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QuestionsCategory: MiscellaneousCyclical company vs recurring revenue
DL asked 1 year ago

Hi 
Can I check if a cyclical company = company that does not have recurring revenue? Are they the same thing?
Also, is there a way for me to know if a company’s revenue is recurring from its financial statements? 

thank you.

1 Answers
Victor Chng answered 1 year ago

Hi DL,
 
Some company that are semi-cyclical are recurring in nature too. The only difference is the semi-cyclical on are cyclical but on a uptrend while the cyclical type can fluctuate in a volatile way.  

Victor Chng replied 1 year ago

Recurring does not comes from looking at financial statements but rather understanding the business.

DL replied 1 year ago

Thanks Victor
What do u mean by “The only difference is the semi-cyclical on are cyclical but on a uptrend”? Do u mean that we can consider semi cyclical business provided it’s revenue is on a uptrend?

You mentioned in your webminar that alphabet advertising business is recurring but I’m not sure if u mentioned that it’s cyclical. I thought advertising depends on economic cycle hence it may not be recurring? Or is advertising semi cyclical?

How do u conclude if a business is cyclical or recurring actually? Saw the webminar that you asked if braces business is recurring or not, and you mentioned that it is recurring cus people need to maintain their teeth. Feels to me that determining if a business is recurring or not can be subjective?

Victor Chng replied 1 year ago

Advertising is recurring as their customer will keep coming back to them for advertising services. In general, I will say that advertising are semi-cyclical in nature but for Alphabet case, because of the change in trend from advertising from office to online. It seem like they are able to continuous grow their revenue.

The main way to determine recurring is to ask whether the customers will keep paying the company to use their product or service. In the braces case, I am giving another perspective of recurring which is recurring problem and it will give business recurring new customer instead of old customers.