Returns On Capital At Vishay Intertechnology (NYSE:VSH) Have Stalled

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of Vishay Intertechnology (NYSE:VSH) looks decent, right now, so lets see what the trend of returns can tell us.

Return On Capital Employed (ROCE): What Is It?

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 Intertechnology is:

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

0.15 = US$535m ÷ (US$4.2b - US$717m) (Based on the trailing twelve months to September 2023).

So, Vishay Intertechnology has an ROCE of 15%. In absolute terms, that's a satisfactory return, but compared to the Electronic industry average of 12% it's much better.

See our latest analysis for Vishay Intertechnology

Above you can see how the current ROCE for Vishay Intertechnology compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Vishay Intertechnology.

So How Is Vishay Intertechnology's ROCE Trending?

While the current returns on capital are decent, they haven't changed much. The company has consistently earned 15% for the last five years, and the capital employed within the business has risen 27% in that time. 15% is a pretty standard return, and it provides some comfort knowing that Vishay Intertechnology has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

In Conclusion...

To sum it up, Vishay Intertechnology has simply been reinvesting capital steadily, at those decent rates of return. However, over the last five years, the stock has only delivered a 11% return to shareholders who held over that period. So because of the trends we're seeing, we'd recommend looking further into this stock to see if it has the makings of a multi-bagger.

On a final note, we found 2 warning signs for Vishay Intertechnology (1 can't be ignored) you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.