Stock Analysis on Net
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 the Firm (FCFF)

Microsoft Excel

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 the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

Motorola Solutions Inc., free cash flow to the firm (FCFF) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 12.18%
01 FCFF0 1,978
1 FCFF1 2,232 = 1,978 × (1 + 12.84%) 1,990
2 FCFF2 2,498 = 2,232 × (1 + 11.94%) 1,985
3 FCFF3 2,774 = 2,498 × (1 + 11.03%) 1,965
4 FCFF4 3,055 = 2,774 × (1 + 10.13%) 1,929
5 FCFF5 3,336 = 3,055 × (1 + 9.22%) 1,878
5 Terminal value (TV5) 122,968 = 3,336 × (1 + 9.22%) ÷ (12.18% – 9.22%) 69,206
Intrinsic value of Motorola Solutions Inc. capital 78,952
Less: Long-term debt (fair value) 6,400
Intrinsic value of Motorola Solutions Inc. common stock 72,552
 
Intrinsic value of Motorola Solutions Inc. common stock (per share) $434.86
Current share price $398.58

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

1 See details »

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.

Weighted Average Cost of Capital (WACC)

Motorola Solutions Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 66,499 0.91 13.04%
Long-term debt (fair value) 6,400 0.09 3.30% = 3.94% × (1 – 16.24%)

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

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 166,840,999 × $398.58
= $66,499,485,381.42

   Long-term debt (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (20.10% + 9.80% + 19.50% + 18.80% + 13.00%) ÷ 5
= 16.24%

WACC = 12.18%

FCFF Growth Rate (g)

FCFF 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)
Interest expense 249 240 215 233 237
Net earnings attributable to Motorola Solutions, Inc. 1,709 1,363 1,245 949 868
 
Effective income tax rate (EITR)1 20.10% 9.80% 19.50% 18.80% 13.00%
 
Interest expense, after tax2 199 216 173 189 206
Add: Dividends declared 604 544 494 449 395
Interest expense (after tax) and dividends 803 760 667 638 601
 
EBIT(1 – EITR)3 1,908 1,579 1,418 1,138 1,074
 
Current portion of long-term debt 1,313 1 5 12 16
Long-term debt, excluding current portion 4,705 6,013 5,688 5,163 5,113
Total Motorola Solutions, Inc. stockholders’ equity (deficit) 724 116 (40) (558) (700)
Total capital 6,742 6,130 5,653 4,617 4,429
Financial Ratios
Retention rate (RR)4 0.58 0.52 0.53 0.44 0.44
Return on invested capital (ROIC)5 28.30% 25.77% 25.09% 24.65% 24.25%
Averages
RR 0.50
ROIC 25.61%
 
FCFF growth rate (g)6 12.84%

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).

1 See details »

2023 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 249 × (1 – 20.10%)
= 199

3 EBIT(1 – EITR) = Net earnings attributable to Motorola Solutions, Inc. + Interest expense, after tax
= 1,709 + 199
= 1,908

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [1,908 – 803] ÷ 1,908
= 0.58

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 1,908 ÷ 6,742
= 28.30%

6 g = RR × ROIC
= 0.50 × 25.61%
= 12.84%

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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (72,899 × 12.18% – 1,978) ÷ (72,899 + 1,978)
= 9.22%

where:

Total capital, fair value0 = current fair value of Motorola Solutions Inc. debt and equity (US$ in millions)
FCFF0 = the last year Motorola Solutions Inc. free cash flow to the firm (US$ in millions)
WACC = weighted average cost of Motorola Solutions Inc. capital

FCFF growth rate (g) forecast

Motorola Solutions Inc., H-model

Microsoft Excel
Year Value gt
1 g1 12.84%
2 g2 11.94%
3 g3 11.03%
4 g4 10.13%
5 and thereafter g5 9.22%

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 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 12.84% + (9.22% – 12.84%) × (2 – 1) ÷ (5 – 1)
= 11.94%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 12.84% + (9.22% – 12.84%) × (3 – 1) ÷ (5 – 1)
= 11.03%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 12.84% + (9.22% – 12.84%) × (4 – 1) ÷ (5 – 1)
= 10.13%