COVID Bump/Dip - short term trends in valuations

February 17, 2021

by a professional from University of Wisconsin - Madison in Green Bay, WI, USA

As we have been performing Quality of Earnings and diligence engagements over the last year, we are seeing interesting earnings trends (either potentially artificially inflated or deflated) across industries. Interested to see how searchers are accounting for potential short term trends in their valuations.

One common issue we are also seeing in diligence is the seller offsetting PPP loans and other credits against their ordinary payroll effectively artificially reducing compensation expense and overstating earnings. Please be on the look out!

We are always available to discuss any unusual items you are seeing in the financials or to discuss the appropriateness of any management add-backs. Feel free to reach out!

Reply by a searcher
in Loudon, NH, USA

I wonder what industries will see these trends remain for years to come vs. be short term blips, either up or down? Will the hospitality industry bounce right back? What about all the people who moved to remote work and will remain that way?

Reply by a professional
from University of South Florida in Tampa, FL, USA

We're also seeing this and a lot of clients are wanting to see what the business may have looked like had COVID not happened or what the business may look like in a post-COVID world.

+1 more reply.

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