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Exactly Timing an industry turnaround is very difficult, it is virtually impossible to be right 10 out of 10 times. This is why while many of us are being called value investor; we do have a speculative element in our thesis - like when will the industry or company turn around. Unless you have a time machine; you will never know when the turn around happens. When valuing a company by its cash flow, we are assuming that business continues as per normal.
Cash flow of a company may fall when the industry is in a down cycle. There are many notable examples in the O&G where companies' cashflow fluctuate due to the cycle - Penguin, MTQ, CSE etc. Similarly the uptick in the semi conductor industry saw companies like AEM and UMS having cash flow growth. Hence while many of us like to value a company on the cash flow metrics, in actual fact, there are some important factors to consider- business cycle is one.
Cash flow of a company may fall when the industry is in a down cycle. There are many notable examples in the O&G where companies' cashflow fluctuate due to the cycle - Penguin, MTQ, CSE etc. Similarly the uptick in the semi conductor industry saw companies like AEM and UMS having cash flow growth. Hence while many of us like to value a company on the cash flow metrics, in actual fact, there are some important factors to consider- business cycle is one.