Motorola Solutions Inc (NYSE:MSI) Stands Out as a Quality Investment Candidate in Caviar Cruise Screen

In quality investing, the Caviar Cruise stock screening strategy is a systematic way to find companies with outstanding operational performance and lasting competitive strengths. This method, based on Luc Kroeze's work on quality investing ideas, centers on businesses showing steady revenue increases, rising profitability, high capital effectiveness, and sound financial condition. The strategy uses strict quantitative measures to find companies suitable for long-term holding, focusing on those traits that usually lead to lasting business achievement.

Motorola Solutions Inc (NYSE:MSI) appears as a noteworthy candidate via this screening method, showing several qualities that match quality investing ideas. The Chicago-based communications infrastructure provider works in land mobile radio systems, video security solutions, and command center software for government and commercial customers globally.

Revenue and Profitability Growth

The Caviar Cruise method favors companies with proven historical growth, needing at least 5% yearly increase in both revenue and EBIT over five years. This dual growth rule makes sure the business is not only growing its revenue but is also getting better at operational effectiveness.

• Revenue Growth (5Y CAGR): 6.86%
• EBIT Growth (5Y CAGR): 10.49%

Motorola Solutions easily meets both minimum levels, with its EBIT growth clearly higher than revenue growth. This difference points to better operational leverage and possible pricing strength, as the company makes increasingly more profit from each extra dollar of sales. The EBIT growth being greater than revenue growth specifically meets a main Caviar Cruise measure made to find companies gaining from scale benefits or competitive strengths that permit margin improvement.

Capital Efficiency and Returns

Quality investing strongly focuses on return on invested capital as a main gauge of business quality. The Caviar Cruise screen requires a ROIC without cash, goodwill, and intangibles over 15%, making sure main operations create strong returns on capital used.

• ROIC (Excluding Cash, Goodwill & Intangibles): 62.93%

Motorola Solutions produces a very high ROIC number that is much greater than the needed level. This notable effectiveness shows the company's main business activities create strong returns compared to the capital put in, making significant value for shareholders. Companies with consistently high ROIC often have lasting competitive strengths that let them put earnings back into the business at good rates, a key part of quality investing thinking.

Financial Health and Cash Flow

The strategy includes strict financial health tests, like a debt-to-free cash flow ratio under 5, showing the company could pay off all its debt in five years using present cash flow amounts.

• Debt-to-Free Cash Flow: 3.24 years

Motorola Solutions keeps a careful debt position relative to its cash production, with a ratio well inside the acceptable range for quality companies. This points to controllable debt levels and financial room. Also, the company shows very good profit quality, with a five-year average free cash flow to net income ratio of 126%, much higher than the 75% minimum. This shows the company turns accounting profits into actual cash even better than needed, giving financial steadiness and means for dividends, share buybacks, or strategic spending.

Fundamental Analysis Overview

According to Chartmill's fundamental analysis report for MSI, Motorola Solutions gets an overall score of 6 out of 10. The analysis points out very high profitability numbers, with scores of 9/10 in this group, doing much better than industry competitors across several margin and return gauges. The company shows medium growth rates with steady historical performance and stable future outlooks. Financial health presents some small worries about debt-to-equity levels, though the ability to pay debts is still sufficient. Valuation seems high based on standard measures, though this is partly reasonable given the company's excellent profitability and quality traits.

Investment Considerations

While quantitative screening finds Motorola Solutions as a quality candidate, investors should think about other non-quantitative points before investment choices. The company gains from long-term directions in public safety and mission-critical communications, works globally with set competitive strengths, and provides necessary technologies that show stability during economic changes. However, possible investors should assess if present valuations match their needed safety margin, as quality often has a high price in the market.

For investors wanting to find other companies that meet the Caviar Cruise quality rules, the full screen with present results is accessible here.

Disclaimer: This article presents factual information and analysis for educational purposes only and does not constitute investment advice, recommendation, or endorsement of any security. Investors should conduct their own research and consult with a qualified financial advisor before making investment decisions.