Motorola Solutions Inc (MSI)

Conclusion

Motorola Solutions sells public safety, government, defense and enterprise security products: two-way radios, video systems, communications networks and command center software. At a price of 527.97 USD on 2026-11-09, the market capitalisation is 87.4 billion USD and the enterprise value is 97.1 billion USD.

The verdict is overvalued. The price trades at a P/E of 41.9 against a ten-year median of 33.2, and at an EV/EBITDA of 27.0 against a median of 21.3. The fair value band runs from 276.40 to 414.60 USD with a midpoint of 345.50 USD, giving a margin of safety of -34.6% at the current price. The discounted cash flow gives 293.09 USD per share, and the fair value from historical multiples is 397.91 USD. The reverse DCF implies growth of 15.6% a year, while revenue grew at 9.5% a year over five years and free cash flow per share at 13.8%.

The strongest supports are free cash flow conversion of 121.5% over the last twelve months, eight earnings beats out of eight quarters, and a ROIC of 19.0% against a WACC of 8.6%. The weakest numbers are the price-to-sales premium of 55.0% over its ten-year median, a price-to-book of 28.5, and net debt of 2.71 times EBITDA. If growth slows toward the rate the market already prices in, the premium to historical multiples could persist and the gap to the fair value band would widen.

Financial health

Financial strength is yellow: the Altman Z-score is safe at 4.21, but leverage and liquidity are only neutral. The current ratio is 1.10, the quick ratio 0.53, net debt to EBITDA 2.71 and interest coverage 7.04 times, with the debt to equity ratio at 3.43. The Altman model was designed for manufacturers, and the company is partly one, so its zone of 4.21 is a useful but imperfect signal. Insolvency risk: low, about 2.9% by the estimate of the Ohlson model over one to two years. Debt has grown by 1.8% a year over five years, close to the pace of revenue growth, so the balance sheet has not been stretched beyond what sales have supported. The company does not report a debt maturity schedule, so the timing of refinancing cannot be judged here.

Earnings quality

Earnings quality is green: cash generation is strong and the accounting signals are clean. Free cash flow conversion is 121.5% over the last twelve months and 120.0% over five years, and the accrual ratio is -0.040, meaning reported earnings are backed by cash. Stock-based compensation is 3.1% of revenue, and free cash flow after it is 2.15 billion USD. The share count fell at a compound rate of 0.7% over five years, so buybacks have more than offset dilution. The Piotroski score is 5 out of 9, which is neutral. The Beneish M-score of -2.36 is well below the manipulation threshold, labelled unlikely. The company beat earnings expectations in all eight of the last quarters, with an average surprise of 6.5%. Analysts raised the current-year estimates over the last 90 days by 4.4%, with 12 upgrades and no downgrades in 30 days, and the next-year estimate rose 4.8% with implied growth of 9.7%.

Profitability

Profitability is green: margins sit above their ten-year medians and returns clearly exceed the cost of capital. The gross margin is 50.6% against a median of 49.1%, the operating margin 24.3% against 20.1%, and the net margin 16.6% against 13.9%. Operating margin stability is 0.135, and the return on invested capital is 19.0% against a WACC of 8.6%, a ROIC minus WACC of 10.3%, which creates value. However, ROIC sits below its five-year median of 28.3%. Return on equity of 68.0% is inflated by leverage: the DuPont split shows a net margin of 18.4%, an asset turnover of 0.60 and an equity multiplier of 8.05. Most of the return on equity therefore comes from the balance sheet, not from the business alone.

Growth

Growth is green: revenue and earnings per share have compounded at high single and mid-teens rates. Revenue grew at 8.6% a year over three years, 9.5% over five and 7.5% over ten. Earnings per share grew at 17.4% over three years, 18.6% over five and 15.5% over ten. Revenue rose in nine of the last ten comparable years. Free cash flow per share compounded at 18.8% over three years, 13.8% over five and 14.0% over ten. These rates are the base the market is extrapolating, and the reverse DCF shows that the price requires faster growth than the five-year record. Growth is therefore well documented, but it is not enough on its own to close the gap to the current price.

Valuation

Valuation is red: the multiples stand well above their own history and the models place the price above the fair value band. The P/E is 41.9 against a median of 33.2, a premium of 26.1%. The EV/EBITDA is 27.0 against 21.3, a premium of 26.9%. The P/FCF is 34.5 against 25.6, a premium of 34.6%, and the P/S is 6.9 against 4.5, a premium of 55.0%. The price-to-book of 28.5 has no ten-year median available. The discounted cash flow uses a discount rate of 9.22% and gives 293.09 USD per share, with 57% of the value in the terminal value, so it should be read with caution. The fair value from historical multiples is 397.91 USD. The fair value band runs from 276.40 to 414.60 USD with a midpoint of 345.50 USD, and the margin of safety is -34.6%. These are estimates built on fixed assumptions, a 5% equity risk premium and capped growth, not price targets. The dividend yield is 0.9%, the forward yield 0.99%, and the payout on free cash flow 30.9%.

Risks

The main risk is that the valuation premium persists or widens if growth slows: the reverse DCF already requires 15.6% a year, against 9.5% for revenue over five years. Leverage is the second risk: net debt of 2.71 times EBITDA and interest coverage of 7.04 times leave less room if earnings fall, and the debt to equity ratio of 3.43 magnifies that. A weaker operating margin would also hurt, because the margin is already above its ten-year median and the return on capital depends on it. The price-to-book of 28.5 has no historical median, so its level cannot be compared with the company's own past. Several values are not available: the debt maturity schedule and the revenue split by segment. This analysis does not cover competitive dynamics, contract pipelines or management decisions, and it relies only on the figures above.