Why Has Motorola Solutions Stock More Than Doubled Over The Last 3 Years?

by Trefis Team
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Motorola Solutions’s (NYSE:MSI) stock price has grown from around $76 in September 2016 to about $167 currently, marking an increase of over 110%. In this analysis, we break down the key drivers of the stock price appreciation.

View our interactive dashboard analysis on Why Has Motorola Solutions Stock More Than Doubled Over The Last 3 Years?

2. We break down the change in Motorola Solutions’ stock into 4 factors:

MSI’s Stock Price = (Revenue x Margins / No. of Shares) x P/E Multiple

The increase in the stock price was primarily driven by growing revenues and margins as well as a sharp increase in the P/E multiple. The company’s share repurchases have also aided its stock price.

3. Motorola Solutions Revenue Projected To Increase 31% from $6 billion in 2016 to ~$8 billion in 2019

  • Motorola Solutions revenues are projected to increase from ~$6 billion in 2016 to ~$8 billion in 2019, driven by an increase in both its products (up 30%) and services sales (up 33%)
  • While the products business is seeing continued strong demand for Land Mobile Radio systems, growth has also been driven by the acquisition of Avigilon, a provider of video-surveillance solutions and analytics software.
  • The services business has also been expanding, driven by the company’s growing services backlog and an increasing push toward selling software such as command center software.

4. Motorola Adjusted Net Income projected to increase by 62% from $0.8 billion in 2016 to $1.3 billion in 2019, With Margins Expanding From 13.8% to 16.2%

 

  • Motorola Solutions adjusted margins expanded from 13.8% in 2016 to 15.8% in 2018 and we expect them to increase marginally over 2019 as well.
  • The margins expansion has been primarily due to the lower U.S. corporate tax rates.
    Net profits have grown from around $0.8 billion in 2016 to about $1.2 billion in 2018 and we expect them to rise to about $1.3 billion in 2019.

5. Declining Share Count Has Helped EPS Grow Faster Than Net Income

  • Motorola Solutions carried out significant share repurchases over 2016-2017, reducing its share count by about 4%.
  • The lower share count and improved profits have enabled EPS to grow from $4.92 in 2016 to $7.15 in 2018. We expect EPS to stand at about $7.80 in 2019.

6. Motorola Solutions’ P/E has expanded from 17x in 2016 to 21.5x in 2019.

  • Motorola solutions P/E has expanded from 17x in 2016 to 21.5x in 2019.
  • The expansion is likely being driven by the company’s increasing pivot towards software, which could increase switching costs for its high-margin land-mobile radio business, and also due to its growing backlog of orders.

 

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