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Oh, ye investors of little faith.

Earlier this week, as Mr. Market looked with worry upon the impending earnings announcement from Motorola Mobility (NYSE: MMI  ) , The Wall Street Journal opined: "Motorola Mobility Shares Drooping Ahead of Earnings." And no wonder. Ahead of earnings, the usually ebullient Street began muttering in discomfort over what tidings Motorola would tell. Bernstein, for example, predicted "in-line" earnings, but warned of "weakness" in the firm's cellphone business. Global Equities Research went a step further, questioning the firm's actual "survivability" as it vies against Apple (Nasdaq: AAPL  ) and Research in Motion (Nasdaq: RIMM  ) to carve out a niche in the smartphone industry. 

They needn't have worried. When the news actually arrived, it showed RIM was the company with survivability issues. Meanwhile, Motorola is up 9%.

Motorola a Mo-Mo
Now mind you, the news wasn't all great. While Motorola Mobility's $3 billion revenue haul exceeded analyst expectations, and "Mo-Mo" also lost less money than expected, it still lost money. This is not ordinarily considered a good thing. The company actually lost quite a lot of money -- $0.27 per share -- despite selling a consensus-topping 4.1 million smartphones in the first quarter.

More importantly, though, Motorola made progress in the cash generation department. Free cash flow that a year ago amounted to just $6 million expanded nearly 10 times to hit $57 million in Q1 2011. With sales up "only" 22%, that gives you an idea of a larger sales base helping Mo-Mo generate more profit from its cellphone business.

By my calculations, this should bring Mo-Mo to about $514 million in free cash flow for the past 12 months, giving the stock a 15 times valuation on free cash flow. The question is whether this is a fair price to pay for a stock that most folks on Wall Street still expect to grow no faster than about 10% a year over the long-term. And the answer …

… is that I still don't think it is. Don't get me wrong. Mo-Mo's got momentum at a time when rivals like Nokia (NYSE: NOK  ) and RIM seem to be losing it, while new entrants to the smartphone and tablet race Hewlett-Packard (NYSE: HPQ  ) and Dell (Nasdaq: DELL  ) are still struggling to exit the gate. Still, there's a reason I've been telling you for months that I prefer Mo-Mo's frumpier elder sibling, Motorola Solutions (NYSE: MSI  ) . Like Mo-Mo, Mo-So exceeded expectations in Q1. But with more than three times Mo-Mo's free cash flow, and a faster rate of estimated growth, Mo-So still leaves Mo-Mo eating dust.

Apple is a Motley Fool Stock Advisor pick. Motley Fool Options has recommended a bull call spread position on Apple and The Fool owns shares of Apple. But Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has a disclosure policy. Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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