Motorola Solutions (NYSE:MSI) has shown a remarkable ability to generate high returns on capital, positioning it as a potential long-term growth stock. But what exactly makes it stand out in the competitive landscape?
One of the key metrics for identifying such companies is Return on Capital Employed (ROCE), a crucial indicator of how efficiently a business generates profits from its capital. For Motorola Solutions, this figure stands at an impressive 23%, well above the Communications industry average of 10%. To put this into perspective, the formula to calculate ROCE is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
Using data from the trailing twelve months to September 2025, the calculation for Motorola Solutions' ROCE is:
0.23 = US$3.0b ÷ (US$19b - US$5.7b)
This high return suggests the company is effectively utilizing its resources, reinvesting its earnings to drive further growth. Over the last five years, Motorola Solutions has increased its capital employed by 86%, while maintaining a stable ROCE of 23%. This combination of rising capital and consistent returns highlights the company's capacity to generate wealth for its shareholders.
Such a performance is indicative of a well-run business or a strong business model, where the management effectively deploys capital to achieve sustained growth. Indeed, investors who have held Motorola Solutions stock over the past five years have been rewarded with a staggering 144% return, proving that the company is not only profitable but also capable of compounding capital at impressive rates.
While these positive trends are evident in the company’s historical performance, it’s crucial to note that past results don't guarantee future performance. To provide a comprehensive view, we also recommend exploring analyst forecasts in our free report on Motorola Solutions.
Despite the positive outlook, investors should be mindful of two warning signs we’ve identified with Motorola Solutions. Understanding these potential risks is an essential part of the investment process.
If you're interested in other high-return companies, we also offer a free list of stocks that have strong fundamentals and are delivering high returns on equity.
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