Motorola Solutions just raised its guidance for the third time this year. In Q3, revenue rose 12.2% YoY to $3.38 billion.
In my view, this is one of the highest-quality businesses we cover. It turns about a fifth of its revenue into free cash flow and spends only 2% on CapEx. Growth is steady rather than fast: organic revenue grew 5.4% YoY, with acquisitions such as Silvus, a maker of battlefield radios for drones and robots, adding the rest.
The share price rose 18.9% in a month to an all-time high close of $527.97 on 9 November, breaking out of a two-year range. That leaves trailing EV/FCF at 38.3x, above its 32.9x three-year median. Can the breakout run at a premium valuation?
We picked MSI today because it is one of just two 4/4 Multi-model Signal names in our coverage right now (MSFT being the other). This may be especially useful because MSI is an under-followed stock.
In today's note, we cover the business in plain terms, the Q3 results, the guidance, the catalysts behind the run-up, our valuation, and the chart.
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DISCLAIMER: This newsletter is intended for educational purposes only. Any information or analysis in this note does not constitute an offer to sell or a solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice, nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.
