Types of Appraisals

One such industry that can be mentioned in this sense is the chemical industry. Starting from the Great Depression until the mid 1950´s, the shares of the biggest chemical companies in the United States were selling at a very high price earnings ratio in comparison to almost all the rest of the stocks. There were scientists that were creating incredible new compounds and after having gone through factories that were very hard to duplicate, the materials that came about ended up being some extraordinary products that looked like it would definitely be a constantly increasing source of prosperity for the ones that had produced them. However, as soon around ten years later came around, the picture was altered. The investment community then started to look at the chemical industry as bulk commodities on a foundation of technical design making them the same as others. Capital intensive industries which are industries, companies, or products whose main costs come about from investments in equipment, machinery, or other capital goods, are in most cases under a lot of stress to work at high rates of capacity so as to pay back the large fixed incomes they have. What often times comes about is very intense price competition and reducing profit margins. Due to this change it caused the shares of the big chemical companies to sell at quite a bit of a lower price earnings ratios in comparison to stocks as a whole. Even though it was still quite a bit higher than a lot of other industries, the chemical price earnings ratio began to bear a resemblance to those of industries such as cement, steel and paper.

The incredible thing about all this is that with one exception there was hardly any or just a little bit of different in the main background of this industry in the 1960´s than there had been in the past thirty years. It is factual that in the last half of during the 1960´s there was a sober accumulation of capacity in some areas like in the manufacture of most of the synthetic textile products. This was obviously a depressant of the earnings of some of the biggest chemical companies. However the fundamental characteristics of the industry had not changed enough to give a reason for this enormous change in the industry’s status in the financial community. It was known that chemical manufacture had always been capital intensive. Almost all the products had in most cases been sold on a technical specification so that one company was not able to raise their prices above that of another one. On the other side though, as an array of new and very improved products have demonstrated, the 1960´s and the 1970´s have provided this industry with a continuously increasing market. It seems that there are close to inexhaustible chances for the human mind to come up with products that cannot be found in nature that will have out of the ordinary properties to provide to the needs of people better or in a cheaper way than the materials that had been used before.