Tyco International Ltd Stock Buy Recommendation Reiterated (TYC)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- Tyco International (NYSE: TYC) has been reiterated by TheStreet Ratings as a buy with a ratings score of B- . The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, expanding profit margins, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • TYC's revenue growth has slightly outpaced the industry average of 3.5%. Since the same quarter one year prior, revenues slightly increased by 3.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • 47.30% is the gross profit margin for TYCO INTERNATIONAL LTD which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 5.40% trails the industry average.
  • Net operating cash flow has slightly increased to $776.00 million or 9.60% when compared to the same quarter last year. Despite an increase in cash flow, TYCO INTERNATIONAL LTD's cash flow growth rate is still lower than the industry average growth rate of 20.43%.
  • TYC's debt-to-equity ratio is very low at 0.29 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.83 is somewhat weak and could be cause for future problems.

Tyco International Ltd. provides security products and services, fire protection and detection products and services, valves and controls, and other industrial products worldwide. It operates through three segments: Tyco Security Solutions, Tyco Fire Protection, and Tyco Flow Control. The company has a P/E ratio of 10.1, below the average diversified services industry P/E ratio of 10.2 and below the S&P 500 P/E ratio of 17.7. Tyco International has a market cap of $12.95 billion and is part of the services sector and diversified services industry. Shares are down 9.9% year to date as of the close of trading on Tuesday.

You can view the full Tyco International Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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