DCF Studio

    MSI · NYQ · Technology

    Motorola Solutions, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 200.53

    Market price

    USD 458.67

    Implied upside

    -56.3%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Current EV/EBITDA of 25.0x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 200.53-56.3%
    Exit multiple
    USD 388.37-15.3%
    Market price
    USD 458.67

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn3bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 12.7bnUSD 13.8bnUSD 15.0bnUSD 16.3bnUSD 17.7bn+8.6%
    EBITUSD 2.9bnUSD 3.2bnUSD 3.5bnUSD 3.8bnUSD 4.1bn+8.6%
    NOPATUSD 2.4bnUSD 2.6bnUSD 2.8bnUSD 3.0bnUSD 3.3bn+8.6%
    Add depreciation & amortisationUSD 480.4mUSD 521.9mUSD 566.9mUSD 615.9mUSD 669.0m+8.6%
    Less capital expenditureUSD -316.9mUSD -344.3mUSD -374.0mUSD -406.3mUSD -441.4m+8.6%
    Less increase in working capitalUSD -321.5mUSD -349.2mUSD -379.4mUSD -412.1mUSD -447.7m+8.6%
    Free cashflow to firmUSD 2.2bnUSD 2.4bnUSD 2.6bnUSD 2.8bnUSD 3.1bn+8.6%
    Discount factor0.95620.87430.79940.73090.6683-
    Present valueUSD 2.1bnUSD 2.1bnUSD 2.1bnUSD 2.1bnUSD 2.1bn-0.7%
    Present Value Of The ForecastUSD 10.4bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.920Reported 0.881, pulled toward 1.0 (Blume)
    Cost of equity10.06%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 75.9bn88.6% of capital
    Total debtUSD 9.8bn11.4% of capital, book value as a proxy
    Tax rate20.0%Effective, capped at statutory
    WACC9.37%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 200.53

    76% of EV

    Forecast FCFF, final year
    USD 3.1bn
    Capex at depreciation, working capital in reinvestment
    USD 3.6bn
    Less reinvestment at g/ROIC (9.9% of NOPAT)
    USD -352.1m
    Capitalised
    USD 3.2bn
    ROIC (reported)
    25.4%
    Terminal value, undiscounted
    USD 48.0bn
    Terminal value, discounted
    USD 32.1bn
    Enterprise value
    USD 42.5bn
    Less net debt
    USD 8.6bn
    Equity value
    USD 33.9bn

    Exit at 20.0x EBITDA

    Value per shareUSD 388.37

    86% of EV

    Terminal value, undiscounted
    USD 95.5bn
    Terminal value, discounted
    USD 63.8bn
    Enterprise value
    USD 74.2bn
    Less net debt
    USD 8.6bn
    Equity value
    USD 65.6bn

    Spread between methods: 64%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    7.37%263.17282.02304.68332.46367.34
    8.37%216.62229.13243.71260.96281.69
    9.37%181.96190.64200.54211.94225.25
    10.37%155.16161.39168.37176.26185.27
    11.37%133.84138.42143.49149.13155.46

    Outlined: this model. Green text: above today's price of 458.67. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year8.6%28.1%+19.4pp
    EBIT margin23.2%48.2%+24.9pp
    Discount rate9.4%5.9%-3.5pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.