Half full, half empty, or the glass is too big

May 10, 2024

by a searcher in USA

Has anyone done any analysis on the % impact COVID had on revenue and earnings for 2021, 2022, 2023? Several CIMs I've looked at in the industrial/manufacturing space are still blaming COVID for poor earnings in 2022, which surprises me a bit since that was one of the busiest and most profitable years I've experienced at my day job. I know there was a lot of supply chain issues, labor shortage, and inflation, but this still seems off to me. Interested in comments from other searchers and business owners.

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

We have not done an official analysis, but I can give you some comments based on what we have seen over the last few years. We review over 1,000 company financial statements every year. There were some businesses that were still impacted in###-###-#### Much of it was supply chain related, due to inflationary pressures on products, or do to industry issues like Nick mentions above. However, many companies saw a rebound in 2022.

The more worrisome trend we have been seeing lately though is that it appeared starting in the 4th quarter of 2023 we started to see the financial statements for many businesses that had the post covid bounce in 2022 and early 2023 start to show some revenue shrinkage and coming into 2024 we are seeing that continue for many companies. Also, we are seeing a large percentage of 2023 tax returns showing lower revenues and/or profits versus 2022 tax returns. So it appears there has been some give back. This is certainly not across the board. But from 2021 to 2022 corporate tax returns just about all showed revenue and / or profit growth. From 2022 to 2023 it appears to be closer to 50% with growth and 50% with shrinkage.

As always if you are planning on buying a business, it is important to look at historical revenues as well as the customer base and projected revenues and the strength of the customers and industries the business serves. Even though revenues may be down slightly from 2022 in 2023, it does not mean there is still not a good deal there. I hope this information helps. I would be more than happy to talk to anyone about this at anytime at redacted

Reply by an investor
from Northwestern University in Chicago, IL, USA

I think a lot of COVID and Post-COVID performance had to do the end markets you are serving. I run a manufacturing business with very broad end market exposure, and that diversity drove us to record years in###-###-#### However, some of our end customers struggled coming out of COVID, notably aerospace (travel volumes cut dramatically and took 2 years to recover) and defense (US defense spending cratered in###-###-#### I've looked at two defense-related manufacturers in the last few months and both showed that dip in###-###-#### , with a resurgence in FY-23 and Q1-24.

The bigger concern I have is on the other side of the coin - whether there was some COVID-era funding or unusual demand signal that drove strong results in###-###-#### that is not going to continue into###-###-#### I came across a business that benefitted from COVID funding that has since dried up - big red flag.

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