1. Uncovering The Multibagger Trends Found in Motorola Solutions (NYSE:MSI)
2. How To Identify Multiplied Value Stocks: An Analytical Look at Motorola Solutions (NYSE:MSI)
3. An Investment Opportunity Worth Exploring: Maximizing Your Return with Motorola Solutions (NYSE:MSI)
For investors aiming to identify stocks that boast the potential to multiply in value over the long-term, there are a few essential trends to consider. Firstly, we need to observe whether the Return on Capital Employed (ROCE) is increasing. Secondly, a varied and expanding base of capital employed is essential for success. Seemingly, Motorola Solutions (NYSE:MSI) is exhibiting all the indicative signs of holding tis ability to profitably reinvest their capital. We shall analyze the trends for their ROCE in order to assess if their success is sustainable.
What is Return on Capital Employed?
Return on Capital Employed (ROCE) measures the amount of pre-tax profit a company can generate from the capital employed in its business. An analyst can calculate this for Motorola Solutions using the following equation:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
For the 12 months leading up to September 2023, this formula results in a ROCE of 0.34 which equates to 34% – a marvelously profitable return which surpasses the 8.3% average of its industry sector.
Observing ROCE Trends
Past performance is noteworthy but an investor should always focus on future performance. A glimpse into analyst forecasts compiled in our free report on analyst predictions reveals the estimated ROCE should be consistent moving forward.
The chart below displays Motorola Solutions’ ROCE against prior performance, helping us form a conclusion as to the future of the company:
It is clear to observe that Motorola Solutions has reaped an impressive return, and capital reinvestment has increased significantly over the past 5 years, culminating in a ROCE of 34%. This is a direct result of the efficient management of their capital investment, and displays a continual trend of increase.
However, some investors may be alerted to their current liabilities to total assets ratio of 43% which is higher than average. This means that the company is fairly reliant on its suppliers and short-term creditors, making it prone to some risks.
Analyzing the Results
When assessing stocks, it is important to acknowledge a company’s capacity to generate income from reinvested capital as well as the risks which accompany such a huge reliance on short-term creditors. In the case of Motorola Solutions, we are certainly inspired thanks to the increasing ROCE and continual reinvestment of capital. The 182% total return experienced over the past 5 years confirms that investors are expecting further success to come in the future.
Investors should always research investing prospects further and consider both positive and negative indicators to form a holistic view. To further aid an understanding of the multiple risks and whether Motorola Solutions is over or undervalued, our comprehensive analysis includes fair value estimates, dividends, insider transactions and financial health checks – see it here.
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