Intrinsic value of Motorola Solutions - MSI

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$88.64

  Intrinsic Value

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  Value-price divergence*

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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of MSI stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 14.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  6.02
  12.00
  11.30
  10.67
  10.10
  9.59
  9.13
  8.72
  8.35
  8.01
  7.71
  7.44
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
Revenue, $m
  6,038
  6,763
  7,527
  8,330
  9,171
  10,051
  10,969
  11,926
  12,921
  13,957
  15,033
  16,152
  17,314
  18,522
  19,778
  21,083
  22,441
  23,854
  25,326
  26,858
  28,455
  30,120
  31,856
  33,669
  35,561
  37,538
  39,603
  41,763
  44,021
  46,383
  48,855
Variable operating expenses, $m
 
  5,313
  5,906
  6,528
  7,180
  7,862
  8,573
  9,315
  10,086
  10,888
  11,723
  12,517
  13,417
  14,353
  15,327
  16,338
  17,391
  18,486
  19,626
  20,813
  22,051
  23,341
  24,687
  26,091
  27,558
  29,090
  30,690
  32,364
  34,114
  35,944
  37,860
Fixed operating expenses, $m
 
  236
  242
  248
  254
  260
  267
  273
  280
  287
  294
  302
  309
  317
  325
  333
  341
  350
  359
  368
  377
  386
  396
  406
  416
  426
  437
  448
  459
  471
  482
Total operating expenses, $m
  4,977
  5,549
  6,148
  6,776
  7,434
  8,122
  8,840
  9,588
  10,366
  11,175
  12,017
  12,819
  13,726
  14,670
  15,652
  16,671
  17,732
  18,836
  19,985
  21,181
  22,428
  23,727
  25,083
  26,497
  27,974
  29,516
  31,127
  32,812
  34,573
  36,415
  38,342
Operating income, $m
  1,061
  1,213
  1,379
  1,554
  1,737
  1,929
  2,129
  2,338
  2,555
  2,781
  3,016
  3,333
  3,587
  3,851
  4,126
  4,412
  4,709
  5,019
  5,341
  5,677
  6,027
  6,392
  6,774
  7,172
  7,587
  8,022
  8,476
  8,951
  9,448
  9,968
  10,513
EBITDA, $m
  1,356
  1,501
  1,692
  1,892
  2,102
  2,321
  2,551
  2,790
  3,039
  3,297
  3,567
  3,847
  4,138
  4,440
  4,755
  5,082
  5,422
  5,777
  6,146
  6,531
  6,932
  7,350
  7,786
  8,242
  8,718
  9,215
  9,735
  10,278
  10,847
  11,442
  12,066
Interest expense (income), $m
  191
  193
  106
  143
  182
  223
  266
  310
  357
  405
  455
  507
  562
  618
  676
  737
  801
  866
  935
  1,006
  1,080
  1,158
  1,239
  1,323
  1,411
  1,502
  1,598
  1,698
  1,803
  1,912
  2,027
Earnings before tax, $m
  844
  1,020
  1,273
  1,411
  1,555
  1,706
  1,863
  2,027
  2,198
  2,376
  2,561
  2,826
  3,026
  3,234
  3,450
  3,675
  3,909
  4,152
  4,406
  4,671
  4,947
  5,235
  5,535
  5,849
  6,177
  6,519
  6,878
  7,253
  7,645
  8,056
  8,486
Tax expense, $m
  282
  275
  344
  381
  420
  461
  503
  547
  594
  642
  691
  763
  817
  873
  931
  992
  1,055
  1,121
  1,190
  1,261
  1,336
  1,413
  1,494
  1,579
  1,668
  1,760
  1,857
  1,958
  2,064
  2,175
  2,291
Net income, $m
  560
  745
  929
  1,030
  1,135
  1,245
  1,360
  1,480
  1,605
  1,735
  1,869
  2,063
  2,209
  2,361
  2,518
  2,682
  2,853
  3,031
  3,216
  3,410
  3,611
  3,821
  4,041
  4,270
  4,509
  4,759
  5,021
  5,295
  5,581
  5,881
  6,195

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,076
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  8,463
  8,277
  9,213
  10,196
  11,226
  12,303
  13,426
  14,597
  15,816
  17,083
  18,400
  19,769
  21,192
  22,671
  24,208
  25,806
  27,468
  29,198
  30,998
  32,874
  34,828
  36,866
  38,992
  41,210
  43,527
  45,946
  48,474
  51,117
  53,881
  56,772
  59,798
Adjusted assets (=assets-cash), $m
  7,387
  8,277
  9,213
  10,196
  11,226
  12,303
  13,426
  14,597
  15,816
  17,083
  18,400
  19,769
  21,192
  22,671
  24,208
  25,806
  27,468
  29,198
  30,998
  32,874
  34,828
  36,866
  38,992
  41,210
  43,527
  45,946
  48,474
  51,117
  53,881
  56,772
  59,798
Revenue / Adjusted assets
  0.817
  0.817
  0.817
  0.817
  0.817
  0.817
  0.817
  0.817
  0.817
  0.817
  0.817
  0.817
  0.817
  0.817
  0.817
  0.817
  0.817
  0.817
  0.817
  0.817
  0.817
  0.817
  0.817
  0.817
  0.817
  0.817
  0.817
  0.817
  0.817
  0.817
  0.817
Average production assets, $m
  1,073
  1,204
  1,340
  1,483
  1,633
  1,789
  1,953
  2,123
  2,300
  2,484
  2,676
  2,875
  3,082
  3,297
  3,520
  3,753
  3,995
  4,246
  4,508
  4,781
  5,065
  5,361
  5,670
  5,993
  6,330
  6,682
  7,049
  7,434
  7,836
  8,256
  8,696
Working capital, $m
  800
  -304
  -339
  -375
  -413
  -452
  -494
  -537
  -581
  -628
  -676
  -727
  -779
  -833
  -890
  -949
  -1,010
  -1,073
  -1,140
  -1,209
  -1,280
  -1,355
  -1,434
  -1,515
  -1,600
  -1,689
  -1,782
  -1,879
  -1,981
  -2,087
  -2,198
Total debt, $m
  4,396
  2,419
  3,260
  4,145
  5,072
  6,041
  7,053
  8,106
  9,203
  10,344
  11,529
  12,761
  14,042
  15,373
  16,756
  18,194
  19,690
  21,247
  22,867
  24,556
  26,315
  28,149
  30,062
  32,058
  34,143
  36,320
  38,596
  40,974
  43,462
  46,064
  48,787
Total liabilities, $m
  9,427
  7,450
  8,291
  9,176
  10,103
  11,072
  12,084
  13,137
  14,234
  15,375
  16,560
  17,792
  19,073
  20,404
  21,787
  23,225
  24,721
  26,278
  27,898
  29,587
  31,346
  33,180
  35,093
  37,089
  39,174
  41,351
  43,627
  46,005
  48,493
  51,095
  53,818
Total equity, $m
  -964
  828
  921
  1,020
  1,123
  1,230
  1,343
  1,460
  1,582
  1,708
  1,840
  1,977
  2,119
  2,267
  2,421
  2,581
  2,747
  2,920
  3,100
  3,287
  3,483
  3,687
  3,899
  4,121
  4,353
  4,595
  4,847
  5,112
  5,388
  5,677
  5,980
Total liabilities and equity, $m
  8,463
  8,278
  9,212
  10,196
  11,226
  12,302
  13,427
  14,597
  15,816
  17,083
  18,400
  19,769
  21,192
  22,671
  24,208
  25,806
  27,468
  29,198
  30,998
  32,874
  34,829
  36,867
  38,992
  41,210
  43,527
  45,946
  48,474
  51,117
  53,881
  56,772
  59,798
Debt-to-equity ratio
  -4.560
  2.920
  3.540
  4.070
  4.520
  4.910
  5.250
  5.550
  5.820
  6.050
  6.270
  6.460
  6.630
  6.780
  6.920
  7.050
  7.170
  7.280
  7.380
  7.470
  7.560
  7.640
  7.710
  7.780
  7.840
  7.910
  7.960
  8.020
  8.070
  8.110
  8.160
Adjusted equity ratio
  -0.276
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  560
  745
  929
  1,030
  1,135
  1,245
  1,360
  1,480
  1,605
  1,735
  1,869
  2,063
  2,209
  2,361
  2,518
  2,682
  2,853
  3,031
  3,216
  3,410
  3,611
  3,821
  4,041
  4,270
  4,509
  4,759
  5,021
  5,295
  5,581
  5,881
  6,195
Depreciation, amort., depletion, $m
  295
  288
  312
  338
  364
  392
  421
  452
  484
  516
  551
  513
  550
  589
  629
  670
  713
  758
  805
  854
  904
  957
  1,013
  1,070
  1,130
  1,193
  1,259
  1,327
  1,399
  1,474
  1,553
Funds from operations, $m
  1,104
  1,032
  1,241
  1,367
  1,499
  1,638
  1,782
  1,932
  2,088
  2,251
  2,420
  2,576
  2,759
  2,949
  3,147
  3,353
  3,567
  3,789
  4,021
  4,263
  4,516
  4,779
  5,053
  5,340
  5,639
  5,952
  6,280
  6,622
  6,980
  7,355
  7,748
Change in working capital, $m
  -61
  -33
  -34
  -36
  -38
  -40
  -41
  -43
  -45
  -47
  -48
  -50
  -52
  -54
  -57
  -59
  -61
  -64
  -66
  -69
  -72
  -75
  -78
  -82
  -85
  -89
  -93
  -97
  -102
  -106
  -111
Cash from operations, $m
  1,165
  1,602
  1,276
  1,404
  1,537
  1,677
  1,823
  1,975
  2,133
  2,298
  2,469
  2,627
  2,811
  3,004
  3,203
  3,411
  3,628
  3,853
  4,088
  4,332
  4,587
  4,853
  5,131
  5,421
  5,724
  6,041
  6,373
  6,719
  7,082
  7,461
  7,859
Maintenance CAPEX, $m
  0
  -192
  -215
  -239
  -265
  -292
  -319
  -349
  -379
  -411
  -444
  -478
  -513
  -550
  -589
  -629
  -670
  -713
  -758
  -805
  -854
  -904
  -957
  -1,013
  -1,070
  -1,130
  -1,193
  -1,259
  -1,327
  -1,399
  -1,474
New CAPEX, $m
  -271
  -131
  -136
  -143
  -150
  -157
  -163
  -170
  -177
  -184
  -192
  -199
  -207
  -215
  -224
  -232
  -242
  -252
  -262
  -273
  -284
  -296
  -309
  -323
  -337
  -352
  -368
  -384
  -402
  -420
  -440
Cash from investing activities, $m
  -1,002
  -323
  -351
  -382
  -415
  -449
  -482
  -519
  -556
  -595
  -636
  -677
  -720
  -765
  -813
  -861
  -912
  -965
  -1,020
  -1,078
  -1,138
  -1,200
  -1,266
  -1,336
  -1,407
  -1,482
  -1,561
  -1,643
  -1,729
  -1,819
  -1,914
Free cash flow, $m
  163
  1,280
  925
  1,021
  1,123
  1,229
  1,340
  1,456
  1,577
  1,703
  1,833
  1,950
  2,091
  2,238
  2,391
  2,550
  2,716
  2,888
  3,068
  3,255
  3,449
  3,653
  3,865
  4,086
  4,317
  4,559
  4,812
  5,076
  5,352
  5,642
  5,945
Issuance/(repayment) of debt, $m
  -13
  -1,973
  842
  885
  927
  969
  1,011
  1,054
  1,097
  1,141
  1,186
  1,232
  1,280
  1,331
  1,383
  1,438
  1,496
  1,557
  1,621
  1,688
  1,759
  1,834
  1,913
  1,997
  2,085
  2,177
  2,275
  2,379
  2,488
  2,602
  2,723
Issuance/(repurchase) of shares, $m
  -749
  2,485
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -762
  512
  842
  885
  927
  969
  1,011
  1,054
  1,097
  1,141
  1,186
  1,232
  1,280
  1,331
  1,383
  1,438
  1,496
  1,557
  1,621
  1,688
  1,759
  1,834
  1,913
  1,997
  2,085
  2,177
  2,275
  2,379
  2,488
  2,602
  2,723
Total cash flow (excl. dividends), $m
  -670
  -694
  1,767
  1,906
  2,050
  2,198
  2,351
  2,510
  2,674
  2,843
  3,019
  3,182
  3,372
  3,569
  3,774
  3,989
  4,212
  4,445
  4,688
  4,943
  5,209
  5,487
  5,778
  6,083
  6,402
  6,737
  7,087
  7,455
  7,840
  8,244
  8,668
Retained Cash Flow (-), $m
  858
  -2,864
  -94
  -98
  -103
  -108
  -112
  -117
  -122
  -127
  -132
  -137
  -142
  -148
  -154
  -160
  -166
  -173
  -180
  -188
  -195
  -204
  -213
  -222
  -232
  -242
  -253
  -264
  -276
  -289
  -303
Prev. year cash balance distribution, $m
 
  1,072
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  0
  1,673
  1,808
  1,947
  2,091
  2,239
  2,393
  2,552
  2,716
  2,887
  3,045
  3,229
  3,421
  3,621
  3,829
  4,046
  4,272
  4,508
  4,755
  5,013
  5,283
  5,565
  5,861
  6,170
  6,495
  6,834
  7,190
  7,564
  7,955
  8,365
Discount rate, %
 
  10.90
  11.45
  12.02
  12.62
  13.25
  13.91
  14.61
  15.34
  16.10
  16.91
  17.75
  18.64
  19.57
  20.55
  21.58
  22.66
  23.79
  24.98
  26.23
  27.54
  28.92
  30.37
  31.89
  33.48
  35.15
  36.91
  38.76
  40.69
  42.73
  44.87
PV of cash for distribution, $m
 
  0
  1,347
  1,286
  1,210
  1,122
  1,025
  921
  815
  709
  605
  504
  415
  335
  264
  204
  154
  113
  81
  57
  39
  25
  16
  10
  6
  3
  2
  1
  1
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Motorola Solutions, Inc. provides mission-critical communication infrastructure, devices, accessories, software, and services in North America, Latin America, the Asia Pacific, the Middle East, Europe, and Africa. The company operates in two segments, Products and Services. The Products segment offers a portfolio of infrastructure, devices, accessories, and software for government, public safety and first-responder agencies, municipalities, and commercial and industrial customers. This segmentÂ’s products include two-way portable radios and vehicle-mounted radios; accessories, such as speaker microphones, batteries, earpieces, headsets, carry cases, and cables; software features and upgrades; and radio network core and central processing software, base stations, consoles, repeaters, and software applications and features. The Services segment provides integration services, such as implementation, optimization, and integration of networks, devices, software, and applications; and managed and support services, such as repair, technical support, and hardware maintenance services, as well as network monitoring, software maintenance, and cyber security services across radio network technologies, command center consoles, and smart public safety solutions. This segment also offers Integrated Digital Enhanced Network (iDEN), a push-to-talk technology, as well as provides iDEN services, including hardware and software maintenance services for its legacy iDEN customers. The company was formerly known as Motorola, Inc. and changed its name to Motorola Solutions, Inc. in January 2011. Motorola Solutions, Inc. was founded in 1928 and is headquartered in Chicago, Illinois.

FINANCIAL RATIOS  of  Motorola Solutions (MSI)

Valuation Ratios
P/E Ratio 26.1
Price to Sales 2.4
Price to Book -15.1
Price to Tangible Book
Price to Cash Flow 12.5
Price to Free Cash Flow 16.3
Growth Rates
Sales Growth Rate 6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 54.9%
Cap. Spend. - 3 Yr. Gr. Rate 9.9%
Financial Strength
Quick Ratio 269
Current Ratio 0
LT Debt to Equity -455.6%
Total Debt to Equity -456%
Interest Coverage 5
Management Effectiveness
Return On Assets 8.2%
Ret/ On Assets - 3 Yr. Avg. 9.4%
Return On Total Capital 14.6%
Ret/ On T. Cap. - 3 Yr. Avg. 15.8%
Return On Equity -104.7%
Return On Equity - 3 Yr. Avg. -5.9%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 47.5%
Gross Margin - 3 Yr. Avg. 47.8%
EBITDA Margin 22%
EBITDA Margin - 3 Yr. Avg. 9.7%
Operating Margin 17.6%
Oper. Margin - 3 Yr. Avg. 5.7%
Pre-Tax Margin 14%
Pre-Tax Margin - 3 Yr. Avg. 3.4%
Net Profit Margin 9.3%
Net Profit Margin - 3 Yr. Avg. 14%
Effective Tax Rate 33.4%
Eff/ Tax Rate - 3 Yr. Avg. 34.4%
Payout Ratio 50%

MSI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MSI stock intrinsic value calculation we used $6038 million for the last fiscal year's total revenue generated by Motorola Solutions. The default revenue input number comes from 2016 income statement of Motorola Solutions. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our MSI stock valuation model: a) initial revenue growth rate of 12% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 10.9%, whose default value for MSI is calculated based on our internal credit rating of Motorola Solutions, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Motorola Solutions.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of MSI stock the variable cost ratio is equal to 78.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $230 million in the base year in the intrinsic value calculation for MSI stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.4% for Motorola Solutions.

Corporate tax rate of 27% is the nominal tax rate for Motorola Solutions. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the MSI stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for MSI are equal to 17.8%.

Life of production assets of 5.6 years is the average useful life of capital assets used in Motorola Solutions operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for MSI is equal to -4.5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $-964 million for Motorola Solutions - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 164.041 million for Motorola Solutions is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Motorola Solutions at the current share price and the inputted number of shares is $14.5 billion.


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Stock chart of MSI Financial statements of MSI Annual reports of MSI
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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