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Is It Time to Pound the Table on Stanley Black & Decker?

http://www.fool.com/investing/general/2012/06/05/is-it-time-to-pound-the-table-on-stanley-black--d.aspx

Sean Williams
June 5, 2012

Shares of Stanley Black & Decker (NYSE: SWK  ) have had a tough go of it lately. Let's take a look at why it's falling and see if cloudy skies are still in the forecast.

How it got here
It wasn't supposed to be like this for Stanley Black & Decker shareholders.

The company, which combined Stanley Works and Black & Decker two years ago, was supposed to benefit from increased cost synergies and greater business segment diversity. What's actually happened is that merger-related costs and its security business are weighing on its growth prospects while the housing market has once again tripped up, causing many to be concerned about recent strength in the construction and do-it-yourself segments.

Still, there are a lot of reasons to be excited about Stanley Black & Decker's outlook if you're a current shareholder. Strong results from Home Depot (NYSE: HD  ) continue to signify strength in the remodeling market, which is good news for the company's tools, hardware, and do-it-yourself line of products. Another boost could come from Sears Holdings (Nasdaq: SHLD  ) . The company, in the midst of its turnaround campaign, will rely heavily on strong brand-name products like Stanley Black & Decker to carry its business during Father's Day and around Christmas, potentially boding well for both companies.

How it stacks up
Let's take a look at how Stanley Black & Decker stacks up next to its peers.

SWK Chart

SWK data by YCharts.

Not surprisingly, Danaher (NYSE: DHR  ) , Snap-on (NYSE: SNA  ) , and Stanley Black & Decker have traded in tandem for years. Perhaps a closer look at their financial metrics will give us better differentiating clues between the companies.

Company

Price/Book

Price/Cash Flow

Forward P/E

Dividend Yield

Stanley Black & Decker 1.5 12.5 9.4 2.6%
Danaher 1.9 12.5 13.5 0.2%
Snap-on 2.1 20.5 10.3 2.3%

Source: Morningstar; yields are projected.

Now this is a fruitful exercise because it does help to differentiate these companies a bit better.

Danaher offers a considerably more diverse line of products that serve multiple industries, so I'm not surprised to see its valuation trade more in-line with Stanley Black & Decker. However, Danaher's paltry dividend yi