Scratch Tyco's Surface and You Might Not Like What You See

At first glance, investing in Tyco(TYC Quote) stock looks like a wonderful idea. It's hard not to salivate when looking at Tyco's historical growth in earnings and cash flow, which are both up an average of 30% a year over the past few years. The prudent investor, however, knows better than to take such impressive numbers at face value.

After taking a peek behind the numbers at Tyco, you'll want to run, not walk, away from this stock.

The Business Model

Growth via acquisitions is generally a loser's game -- and Tyco is growing principally through acquisitions. Last quarter, for instance, it boasted 29% year-over-year growth, but this growth was almost entirely due to acquisitions. Without acquisitions, Tyco's growth was a paltry 1%. ...