Tyco International

(TYC)

is probably best known to investors for the financial excesses of its former CEO Dennis Kozlowski. But the face of the company has changed greatly under the leadership of current Chairman and CEO Edward Breen, who joined Tyco in 2002.

The biggest change of all was enacted this summer, when the company split into three segments June 29, separating Tyco's health care and electronics businesses into

Covidien

(COV)

and

Tyco Electronics

(TEL) - Get Report

. Still, the breakup strategy hasn't done much to boost Tyco International shares, which closed Wednesday at $43.61, down 20% since the split.

With that in mind, I'm here to answer readers' questions: Should you buy shares in Tyco International, or should this former conglomerate remain in the bargain bin?

Following June's divestiture, the remaining businesses at Tyco International generate about $20 billion of annual revenue and fall into two divisions: engineered products/services and fire/security. The former includes units that offer everything from sprinkler systems and pressure valves to electrical conduits and engineering services, while the latter is highlighted by the ADT Security business, which protects more than 8 million customers.

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While Tyco International's businesses do have some exposure to the potential for declining construction activity as the economy slows, the good news is that a lot of demand for its industrial products also comes from energy and water utilities, which are still actively attempting to update aging infrastructure. The fire and security division also generates about half of its revenue from recurring service fees.

Following the split, management has targeted 4% to 6% annual organic revenue growth. And according to a research note by Deutsche Bank analyst Nigel Coe, the company should leverage these higher sales into 20% compound annual earnings growth over the next five years. Coe upgraded Tyco International on Tuesday from hold to buy.

One way Tyco International can reach annual 20% earnings growth is through management's plan to cut $450 million of operating expenses this year. The company also continues to benefit from a weaker dollar, generating some 50% of its revenue overseas. Earnings also could see a boost if the company uses its $1 billion of expected annual free cash flow to buy back stock or bankroll accretive acquisitions.

With that in mind, I do believe that Tyco International is attractive to purchase at current levels following its recent 20% pullback. Following its breakup, the remaining businesses generate steady mid-single-digit revenue growth, which could be leveraged to 20% earnings growth by management's cost-cutting efforts.

Tyco International currently trades at 16.9 times expected fiscal 2008 (ending September) earnings of $2.58 a share, a discount to its estimated growth rate. I believe the stock can move back above $50 over the coming quarters.

David Peltier is a research associate at TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Peltier appreciates your feedback;

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