Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. However, after investigating Vishay Intertechnology (NYSE:VSH), we don't think it's current trends fit the mold of a multi-bagger.
Return On Capital Employed (ROCE): What Is It?
Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Vishay Intertechnology, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.10 = US$361m ÷ (US$4.3b - US$709m) (Based on the trailing twelve months to March 2024).
So, Vishay Intertechnology has an ROCE of 10%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Electronic industry average of 11%.
In the above chart we have measured Vishay Intertechnology's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Vishay Intertechnology .
So How Is Vishay Intertechnology's ROCE Trending?
When we looked at the ROCE trend at Vishay Intertechnology, we didn't gain much confidence. Around five years ago the returns on capital were 18%, but since then they've fallen to 10%. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It may take some time before the company starts to see any change in earnings from these investments.
The Bottom Line On Vishay Intertechnology's ROCE
In summary, Vishay Intertechnology is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. Although the market must be expecting these trends to improve because the stock has gained 54% over the last five years. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.
Vishay Intertechnology does have some risks though, and we've spotted 2 warning signs for Vishay Intertechnology that you might be interested in.
While Vishay Intertechnology isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
成長の可能性があるビジネスを見つけるのは容易ではありませんが、いくつかの主要な財務指標を見ることができれば可能です。まず、増え続ける資本利用率(ROCE)が証明されていること、そして、増え続ける資本使用ベースを見たいと思います。基本的に、会社が収益性の高い事業を継続的に再投資できる可能性があり、これは複合機械の特徴です。しかし、数字を簡単に見てみた後、私たちはOrbusNeich Medical Group Holdings(HKG:6929)が今後マルチバッグを成す可能性は低いと考えていますが、その理由を見てみましょう。 資本利回り (ROCE)とは何ですか?わからない方には、ROCEは企業が事業に使用する資本から、税引き前利益をどれだけ生成できるかを測定します。アナリストは以下の式を使用して、Bumi Armada BerhadのROCEを計算します。「ROCE = 利息や税金を除いた利益 (EBIT) ÷ (総資産 - 流動負債)」。したがって、ホームデポのROCEは40%です。それは素晴らしいリターンです。さらに、同じ業種の企業が獲得した13%の平均を上回っています。NYSE:HD Return on Capital Employed 2024年4月10日これはビジネスに投入された資本のROCE(投下資本利益率)です。それは、その収益をビジネスに再投資し、より高いリターンを生み出すことができる連続成長機械であることを示しています。しかしながら、ビシェイインターテクノロジー(NYSE:VSH)を調査した後、現在の傾向が多バッガーの模範的なものではないと思います。