Warren Buffett (Trades, Portfolio) has made plenty of errors throughout his career, but one of the biggest in recent years seems to be the acquisition of Precision Castparts Corp.

The Oracle of Omaha‘s insurance conglomerate, Berkshire Hathaway (BRK.A , Financial) (BRK.B , Financial), bought this aerospace engineering group in early 2016. It looks as if he was attracted to the company because it had a durable competitive advantage, which allowed it to earn high returns on capital.

Manufacturing and supplying components to the aerospace industry is a pretty specialist niche, so manufacturers are unlikely to change their suppliers overnight. With the outlook for the aviation industry improving year by year, it also looked as if the company‘s growth trajectory was attractive considering the forecast at the time.

In 2016, Berkshire paid $32.7 billion (or $235 per share), as well as assuming approximately $5 billion of debt for total consideration of $37.7 billion. To put this number into perspective, the $32.7 billion equity price was approximately 26 times 2015’s free cash flow or a free cash flow yield of 4%.

At first glance, this seems a bit on the pricey side. Buffett has said in the past that he only likes to buy companies when he can earn a double-digit free cash flow return, so we could argue this acquisition was expensive compared to past deals.

However, we do not know how he approached the valuation process at the time. He has been willing to pay a higher multiple for companies with stronger competitive advantages in the past, so this could be an exception.

Still, what is fascinating is how the investment has performed since the acquisition.

When the pandemic slammed into the aviation industry, a disaster that even Buffett could not have foreseen, it devastated the business and forced Berkshire to write down the value of the enterprise. In the second half of 2022, Berkshire wrote the value of Precision down by $9.8 billion. Following this writedown, there was no denying the company overpaid for the aerospace business (based on what has happened since the deal).

But the good news is profits are returning to the business. According to Berkshire’s first-quarter earnings release, Precision’s revenue was $1.8 billion in the first quarter, an increase of 12.7% over the first quarter of 2021. Meanwhile, pre-tax earnings increased by "$16 million in the first quarter of 2022 compared to 2021, reflecting the impact of increased revenues, partially offset by a $13 million reduction in pension plan income.”

However, there’s one line that really stands out in the report:

“The improvement in operating results also reflects the continual actions taken by management to improve operations and to prepare for more normalized demand for PCC’s products.”

It goes on to note the group does not expect aerospace revenue or earnings to increase significantly in the near term. This seems to suggest Buffett overpaid for the company when he first bought it in 2014.

Precision seemed to be benefiting from a period of elevated demand, which has not returned. I should add a side note here. While the pandemic did hurt the company, its prolonged pain is a result of continuing delays for Boeing (BA , Financial) aircraft certification, which has nothing to do with the pandemic.

It will be interesting to see if Buffett has anything to say on this position in the future, but based on this information, it seems he overpaid for Precision Castparts and its growth might continue to struggle. It shows even Buffett makes mistakes and it is possible to overpay for high-quality businesses, no matter how definitive their advantages might appear.