Stock Analysis on Net

Motorola Solutions Inc. (NYSE:MSI)

This company has been moved to the archive! The financial data has not been updated since August 1, 2024.

Present Value of Free Cash Flow to Equity (FCFE)

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In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.


Intrinsic Stock Value (Valuation Summary)

Motorola Solutions Inc., free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFEt or Terminal value (TVt) Calculation Present value at 13.04%
01 FCFE0 1,790
1 FCFE1 8,605 = 1,790 × (1 + 380.70%) 7,612
2 FCFE2 33,390 = 8,605 × (1 + 288.05%) 26,131
3 FCFE3 98,630 = 33,390 × (1 + 195.39%) 68,285
4 FCFE4 199,954 = 98,630 × (1 + 102.73%) 122,468
5 FCFE5 220,101 = 199,954 × (1 + 10.08%) 119,258
5 Terminal value (TV5) 8,176,870 = 220,101 × (1 + 10.08%) ÷ (13.04%10.08%) 4,430,507
Intrinsic value of Motorola Solutions Inc. common stock 4,774,262
 
Intrinsic value of Motorola Solutions Inc. common stock (per share) $28,615.64
Current share price $398.58

Based on: 10-K (reporting date: 2023-12-31).

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.


Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.30%
Expected rate of return on market portfolio2 E(RM) 13.81%
Systematic risk of Motorola Solutions Inc. common stock βMSI 0.92
 
Required rate of return on Motorola Solutions Inc. common stock3 rMSI 13.04%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rMSI = RF + βMSI [E(RM) – RF]
= 4.30% + 0.92 [13.81%4.30%]
= 13.04%


FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Motorola Solutions Inc., PRAT model

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Average Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in millions)
Dividends declared 604 544 494 449 395
Net earnings attributable to Motorola Solutions, Inc. 1,709 1,363 1,245 949 868
Net sales 9,978 9,112 8,171 7,414 7,887
Total assets 13,336 12,814 12,189 10,876 10,642
Total Motorola Solutions, Inc. stockholders’ equity (deficit) 724 116 (40) (558) (700)
Financial Ratios
Retention rate1 0.65 0.60 0.60 0.53 0.54
Profit margin2 17.13% 14.96% 15.24% 12.80% 11.01%
Asset turnover3 0.75 0.71 0.67 0.68 0.74
Financial leverage4 18.42 110.47
Averages
Retention rate 0.58
Profit margin 14.23%
Asset turnover 0.71
Financial leverage 64.44
 
FCFE growth rate (g)5 380.70%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

1 Retention rate = (Net earnings attributable to Motorola Solutions, Inc. – Dividends declared) ÷ Net earnings attributable to Motorola Solutions, Inc.
= (1,709604) ÷ 1,709
= 0.65

2 Profit margin = 100 × Net earnings attributable to Motorola Solutions, Inc. ÷ Net sales
= 100 × 1,709 ÷ 9,978
= 17.13%

3 Asset turnover = Net sales ÷ Total assets
= 9,978 ÷ 13,336
= 0.75

4 Financial leverage = Total assets ÷ Total Motorola Solutions, Inc. stockholders’ equity (deficit)
= 13,336 ÷ 724
= 18.42

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.58 × 14.23% × 0.71 × 64.44
= 380.70%


FCFE growth rate (g) implied by single-stage model

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (66,499 × 13.04%1,790) ÷ (66,499 + 1,790)
= 10.08%

where:
Equity market value0 = current market value of Motorola Solutions Inc. common stock (US$ in millions)
FCFE0 = the last year Motorola Solutions Inc. free cash flow to equity (US$ in millions)
r = required rate of return on Motorola Solutions Inc. common stock


FCFE growth rate (g) forecast

Motorola Solutions Inc., H-model

Microsoft Excel
Year Value gt
1 g1 380.70%
2 g2 288.05%
3 g3 195.39%
4 g4 102.73%
5 and thereafter g5 10.08%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= 380.70% + (10.08%380.70%) × (2 – 1) ÷ (5 – 1)
= 288.05%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 380.70% + (10.08%380.70%) × (3 – 1) ÷ (5 – 1)
= 195.39%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 380.70% + (10.08%380.70%) × (4 – 1) ÷ (5 – 1)
= 102.73%