Did Motorola Solutions Rally Too Far After Solid Q1 Earnings Growth in 2025?

If you have been keeping an eye on Motorola Solutions stock, you know it rarely strays far from investors' radar. Maybe you are wondering if this run can keep going or if it is time to lock in gains. After all, in the last thirty days, MSI's share price has climbed nearly 10%, and over the past year, it has delivered an impressive 9.6% total return. Even more eye-catching is that the stock has more than doubled investors’ money if you stretch the timeline back five years. This is not too shabby for a company that many think of as “old tech.” So what is driving these moves? It is partly the strength of Motorola Solutions' recurring public safety revenue and a sense that the company is less vulnerable to tech sector swings than some of its peers. On the other hand, you may notice its 1-day and 7-day returns have been flat to slightly negative, reflecting a bit of caution after the latest rally. Investors are clearly weighing growth potential against current risks. When it comes to valuation, here is the main point: on most traditional measures, MSI does not look deeply undervalued right now. Out of six common valuation checks, Motorola Solutions scores just 1, suggesting the market is pricing in a lot of optimism already. But before you decide what this means for your portfolio, let us dig into how those valuation metrics stack up. We will also explore an even sharper way to gauge whether Motorola Solutions is truly worth your investment dollars. Motorola Solutions delivered 9.6% returns over the last year. See how this stacks up to the rest of the Communications industry.

Approach 1: Motorola Solutions Cash Flows

A Discounted Cash Flow (DCF) model estimates a company's value by projecting its future annual cash flows and then discounting those back to today's dollars. It is a tool designed to help investors judge whether a stock is trading at a premium or a discount to its true worth.

Motorola Solutions generated Free Cash Flow of $2.35 billion over the last twelve months. Based on analysts' forecasts, this figure is expected to steadily climb in coming years, potentially reaching $4.06 billion by 2035. These steady increases indicate solid operational momentum and confidence in future earnings power.

According to the preferred 2 Stage Free Cash Flow to Equity valuation model, the DCF calculation suggests Motorola Solutions' intrinsic fair value is approximately $363.83 per share. This is compared to the company's current share price, resulting in a DCF-implied discount of -27%. A negative discount like this means the shares are trading above their estimated intrinsic value.

In summary, by this approach, Motorola Solutions appears notably overvalued. The market price reflects more optimism than what the company's projected cash flows would justify.

Result: OVERVALUED

Our DCF analysis suggests Motorola Solutions may be overvalued by 27.0%. Find undervalued stocks based on DCF analysis or create your own screener to find better value opportunities.

Approach 2: Motorola Solutions Price vs Earnings

For profitable companies like Motorola Solutions, the price-to-earnings (PE) ratio gives investors a direct lens into how the market is valuing each dollar of earnings. The PE ratio is favored because it allows for clean comparisons across companies of various sizes within the same sector.

Growth expectations and risk play a big part in determining what a "normal" PE should look like. Companies with higher growth prospects or lower risks can often justify a higher PE, while slower-growth or riskier firms usually trade with lower ratios.

Motorola Solutions’ current PE ratio stands at 36.4x, nearly matching its peer group average of 36.7x. However, this is significantly higher than the broader Communications industry average of 25.4x. Simply Wall St's proprietary Fair Ratio for Motorola Solutions is calculated at 25.0x, reflecting its unique blend of profitability, earnings growth outlook, and industry dynamics.

When compared to the Fair Ratio, Motorola Solutions is trading well above what would be considered a reasonable multiple based on its fundamentals. This suggests the stock is priced with considerable optimism and may not offer a bargain at current levels.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Motorola Solutions Narrative

A Narrative is your personalized story about a company. It connects the numbers you expect to see, such as future revenue, earnings, and margins, to a clear reason why those numbers should happen. Narratives help you tie together what you know about Motorola Solutions and project it forward, translating your perspective into a financial forecast and, ultimately, a fair value estimate.

On Simply Wall St, Narratives make it easy for anyone to structure their thinking, share it with millions of other investors, and update their view dynamically as new information, such as earnings or news, becomes available. This approach gives you a clear, at-a-glance summary. When the Fair Value in your Narrative is above the current Price, it might be time to buy; when it is lower, it might be time to reconsider.

For example, one Motorola Solutions Narrative sees strong growth from new software offerings and recurring revenue streams, resulting in a fair value of $500.63. Another highlights risks from government contract dependence or margin pressures, leading to a significantly lower estimate. By comparing these perspectives, you can quickly see exactly where you stand and make more informed buy or sell decisions, all based on your chosen story.

Do you think there's more to the story for Motorola Solutions? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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