I am focused primarily on consumer sectors.
Most companies I'm seeing right now have the following pattern:
- EBITDA up###-###-#### % 2019 vs. 2021E
- Sales up 10-25% 2019 vs. 2021
- Costs flat, slightly down or up 2019 vs. 2021
Bears would say 1) costs go up from here -- wages, fuel, rent, input costs all have severe price movements, and 2) demand slows or falls back to 2019 levels, so###-###-#### EBITDA is 2019*(1+real growth+inflation)
Bulls would say 1) a good company can pass the costs through, and 2)the boom is self-reinforcing and causes more demand (MMT), so###-###-#### is 2021*(1+real growth+inflation).
Of course, it depends on the sector, but ignoring outlier sectors like outdoor pool companies or downtown conventions., the high 2021 EBITDA pattern cuts across almost every company I see, be it products or services. Almost every valuation implicitly is making a macro bet, and the range is substantial.
Curious how searchers and investors are thinking about this?
It could be fool's gold. No matter what industry in which you want to buy a business. Beware of the risk culprits: Supply chain; labor shortages and costs; competitive advantages; industry rollups; quality of earnings; business buyer competition. Last but not least: Company/industry/customer behavior before/during/after Covid.
One of the most important values I contribute to my clients is helping them realize that sustainable return on investment trumps nearly everything else. We keep that in mind when we’re selecting sectors to target.
This article tells the tale: North Carolina’s Furniture Hub Is Booming. What Comes Next?
The furniture capital of the state is ground zero for inflation, labor shortages, hot demand and limited sustainable supply. It’s debating how to cope.
https://dnyuz.com/2021/11/27/north-carolinas-furniture-hub-is-booming-what-comes-next/