Motorola Solution [MSI] Stock Analysis

[DCF analysis]

https://drive.google.com/file/d/19KowH0Q_kUPVdmOHbkP-k0Gyn4SOKm1o/view?usp=sharing

Dividend Analysis

https://drive.google.com/file/d/1k9VwlxnFwt424rZXTesAGOw7yinzOwHX/view?usp=sharing

Hello, I've recently noticed a lot of hype surrounding Motorola Solutions (MSI), particularly after their strong FY2025 results. I wanted to check whether the stock still looks like a strong buy at its current price.

I started with a DCF model using Free Cash Flow. I tested three growth assumptions: a bear case of around 9–10%, a base case of around 12%, and an optimistic case of 15% year-over-year FCF growth. Based on my spreadsheet, only the optimistic 15% growth case showed MSI as undervalued. Under the base and bear assumptions, the stock appears to be trading at a premium, roughly around 22%.

For the terminal value, I used a 2.5% perpetual growth rate, which is close to long-term U.S. economic growth. For the discount rate, I estimated the WACC using the CAPM, which yielded a ballpark discount rate of approximately 8.94%.

I did not rely only on the DCF model. Since MSI is also a dividend growth stock, I examined its estimated 10-year dividend CAGR of approximately 11.03% and its 10-year FCF CAGR of around 11.97%. Using a dividend discount model with a similar discount rate and a more conservative 7% dividend growth assumption, I got an estimated value of about $336.29 per share.

Finally, I also did a reverse DCF analysis. To justify the current stock price of about $431.60 using a similar discount rate, MSI would need to grow FCF at around 13.10% annually. That is higher than its own historical 10-year FCF CAGR of around 11.97%, which makes the current price look quite demanding.

So based on my analysis, MSI still looks like a high-quality company, but at the current price, the stock seems expensive unless you believe it can sustain very strong FCF growth for many years. My rough conclusion is that MSI may be trading around 20%+ above fair value under more reasonable assumptions. What do you guys think?