Motorola Solutions Inc. does fairly well in the ModernGraham model, and is suitable for Enterprising Investors. The Defensive Investor is concerned with the lack of earnings stability or sufficient growth over the last ten years, inconsistent dividend history and the high PEmg and PB ratios, while the less conservative Enterprising Investor has no initial concerns. As a result, Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.
When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from a loss of $1.37 in 2010 to an estimated gain of $2.99 for 2014. This is a strong level of demonstrated growth which is well above the market’s implied estimate of 6.7% annual earnings growth over the next 7-10 years. Therefore, the model returns an estimate of intrinsic value well above the current price, indicating the company is significantly undervalued at the present time.
Be sure to check out previous ModernGraham valuations of Motorola Solutions Inc. (MSI) for greater perspective!
Disclaimer: The author did not hold a position in Motorola Solutions Inc. (MSI) at the time of publication and had no intention of changing that position within the next 72 hours. Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.