Identifying Stocks with Potential for Long-Term Value Multiplication

Investors often seek stocks that have the potential to multiply in value over the long term. One approach to identifying such stocks is by looking for companies with increasing returns on capital employed (ROCE) and a growing amount of capital employed. This indicates that the company is a compounding machine, reinvesting its earnings back into the business and generating higher returns.

MSA Safety (NYSE:MSA) is a company that exhibits these characteristics. ROCE measures the return a company generates from the capital employed in its business. MSA Safety has an impressive ROCE of 20%, surpassing the industry average of 8.5%.

Over the past five years, MSA Safety has consistently earned a ROCE of 20% and has seen a 39% increase in capital employed. These trends suggest that the company has the potential to become a multi-bagger, a term used to describe stocks that multiply in value significantly.

While MSA Safety’s stock may be considered more expensive now, the company’s strong fundamentals justify further research. Shareholders who held the stock over the past five years have earned a respectable 64% return.

However, it’s important to note that MSA Safety also carries some risks, which investors should be aware of. It is essential to conduct thorough research before making any investment decisions.

Overall, MSA Safety’s ability to reinvest its capital at high rates of returns and its strong performance make it a stock worth considering for potential long-term value multiplication.

(Source: Simply Wall St)