Fundamentals: Tyco's 12-month sales have risen a paltry 0.9%. Fiscal fourth-quarter profit expanded 30% to $266 million, or 55 cents a share, as revenue ascended 4% to $4.5 billion. The operating margin stretched from 9.6% past 10%. Tyco held $1.8 billion of cash and $4.2 billion of debt at the end of the quarter, translating to a quick ratio of 0.8 and a debt-to-equity ratio of 0.3. Amid tepid sales growth, cost reductions have bolstered net income.
Valuation: Tyco's stock trades at a forward earnings multiple of 12 and a book value multiple of 1.4, 21% and 37% discounts to industrial conglomerate industry averages. Its trailing earnings multiple of 18, sales multiple of 1.2 and cash flow multiple of 7.6 are on par with conglomerate peer averages. The stock's PEG ratio of 0.6 reflects a 40% discount to estimated fair value. Morgan Stanley offers a bullish-scenario target of $61 and a bearish-scenario target of $32.