Does Vishay Precision Group (NYSE:VPG) Have The Makings Of A Multi-Bagger?

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, we've noticed some promising trends at Vishay Precision Group (NYSE:VPG) so let's look a bit deeper.

Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Vishay Precision Group is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.075 = US$26m ÷ (US$402m - US$48m) (Based on the trailing twelve months to December 2020).

So, Vishay Precision Group has an ROCE of 7.5%. In absolute terms, that's a low return and it also under-performs the Electronic industry average of 11%.

View our latest analysis for Vishay Precision Group

In the above chart we have measured Vishay Precision Group's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What Can We Tell From Vishay Precision Group's ROCE Trend?

We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. The data shows that returns on capital have increased substantially over the last five years to 7.5%. The amount of capital employed has increased too, by 59%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line On Vishay Precision Group's ROCE

To sum it up, Vishay Precision Group has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if Vishay Precision Group can keep these trends up, it could have a bright future ahead.

On a separate note, we've found 1 warning sign for Vishay Precision Group you'll probably want to know about.

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