Thread by @bentigg

How to tell if a business is linked / correlated to a commodity?

I just saw this $3.5M EBITDA #smallbusiness for sale: Recycled Resin and Plastic Supplier

PLASTICS = polyethylene

Ok, let's see what's up here 🧵

All questions start with me opening up Google

Google search "polyethylene price"

This 2nd link looks promising...a chart.

I like charts.

2019: $1,000

2020: $800 (drop of 20%)

2021: $1400 (increase of 80%)

2022: $1200 and declining? (20% decrease)

Ok...Seems like a wild ride here....Up one year, down the next, up, down.

Looks like a rollercoaster!

Then I look to the financials in the broker's teaser:

2019-2020: rev drop of ~30%
2020-2021: rev increase of 50-60%
2021-2022: rev decrease of 20%

Hmm...they seem to follow the same pattern?

Let's just double check maybe my eye sight is off

Correlation: 0.95 (measures the strength of the relationship)
R squared: 0.91 (explainability of the correlation)

It's correlated!

Damn I'm good! 😁

Businesses linked to commodities can be interesting

Many professional business buyers avoid them entirely due to the boom and bust nature, also why they avoid anything in energy

Because you're a price taker & lack control, speculative nature to it

But you do you

1. Follow me @bentigg
2. RT the tweet if you thought this was interesting

https://twitter.com/30272141/status/1598767501394984963