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Guide · Sectors
How to analyze commodity companies: the cyclical-earnings trap
Vale, Petrobras, Suzano, Gerdau — their profit isn't decided by management alone, but by the commodity price: iron ore, oil, pulp, steel. That price is cyclical and outside the company's control. Ignoring the cycle is the #1 mistake in this sector.
Why P/E misleads here
At the top of the cycle, the commodity price surges, earnings explode and the P/E goes very low — it looks like a bargain, exactly when reversal risk is highest. At the bottom, earnings vanish and the P/E goes sky-high or negative — it looks expensive, exactly when it may be cheap. It's the opposite of intuition.
The cycle in one chart: Vale's ROIC
Vale's ROIC went from 0.7% (2019) to 59.9% (2021, iron-ore peak) and back to 6.6% (2025) — same company, same management. Anyone who saw 59.9% and projected "ultra-high-return business" fell into the top-of-cycle trap. The cycle average says far more than any single year.
What really separates winners
- Production cost — the lowest-cost producer survives the trough and profits at the peak. It's the sector's #1 competitive variable.
- Debt — leverage + cycle is a dangerous mix. A leveraged commodity at the bottom of the cycle may not survive. See net debt/EBITDA.
- Capital discipline — reinvest at the (expensive) top or return cash? Good companies allocate well through the cycle.
How Dados B3 helps
Our strength here is the 16-year history: you see ROIC, margin and debt year by year, which exposes the cycle instead of hiding it in a single number. And the multiples are point-in-time — the 2021 P/E uses the price from when the 2021 report came out, without contaminating the history.