ADT Corp (ADT): Is It Too Expensive To Buy?

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Comps
ADT Corp (NYSE:ADT) is relatively unique in the public market in that it does not have a direct competitor. Companies such as Protection One and Bosch Security are privately held entities, which makes comparing valuation difficult. At more than 21 times forward earnings, though, ADT appears expensive regardless. On a trailing basis, the company’s enterprise value trades at nearly nine times EBITDA.

There are some public companies that are moving into the home automation/security industry, such as media juggernaut Comcast Corporation (NASDAQ:CMCSA). The latter is rolling out products that easily complement its cable provider business, and conversion rates are appealing. Time Warner Cable Inc (NYSE:TWC) is doing something very similar as well.

With a limited moat and the threat of the better-scaled cable operators, there is a fair amount of risk in ADT Corp (NYSE:ADT), especially at today’s prices. All in all, investors are wise to wait for a drop in price for a better entry point into this well-managed, strong-performing company.

The article ADT Is an Industry Leader With New Competition originally appeared on Fool.com and is written by Michael Lewis.

Fool contributor Michael Lewis has no position in any stocks mentioned, and neither does The Motley Fool.

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