One-glance verdict
Within fair range
$20.16 our estimate vs market $26.85
Wall Street consensus: $32.80 (62.7% higher than our fair-value estimate)
33% above our estimate
Fundamentals snapshot
CAE Inc.
CAE · NMS · Industrials · Aerospace & Defense
Current price
$26.85
52-week range
$22.76 - $34.24
Market cap
$8.60B
Balance sheet
Stretched
3.34x Stretched
Net debt $1.88B. Interest coverage shows how many times profit covers the interest bill.
What stands out
2 Rewards
3 Risks
2 rewards · 3 risks
- Reward Revenue grew 4.4% last year.
- Reward Free cash flow was positive in 3/10 years.
- Risk Stock trades 60.2% above its 5-year average P/E.
- Risk Operating margin compressed from 11.2% to 10.1% over 3 years.
What this company does
CAE Inc.
CAE Inc. is like a high-tech school for pilots and defense personnel, teaching them how to fly planes and operate important equipment safely using simulators. Their money mostly comes from these training services for both civilian airlines and military branches. This is important because good training leads to safer flights and more effective defense operations.
How the company got here
CAE Inc. started in 1947 as CAE Industries Ltd. in Canada, initially focusing on electronics and manufacturing. A significant shift occurred when the company began specializing in simulation technology, particularly for the aviation industry. This strategic pivot, solidified by its name change to CAE Inc. in 1993, laid the groundwork for its future as a global leader in training and simulation solutions. Over the decades, CAE has expanded its reach and capabilities, becoming a critical partner for both civil aviation and defense sectors worldwide.
What it actually does
At its core, CAE Inc. provides advanced training and simulation systems. Think of it like a highly sophisticated flight simulator, but for pilots, cabin crew, maintenance technicians, and even air traffic controllers. They also offer training services and digital solutions to help these professionals and organizations operate more safely and efficiently. Beyond aviation, CAE extends its expertise to defense and security, creating training programs and simulation tools for military and public safety personnel.
Civil Aviation
This segment is all about training people who work in the world of airplanes and helicopters. CAE provides everything from flight simulators that feel incredibly real to training programs for pilots, flight attendants, and mechanics. They also offer services like training new pilots from scratch and even helping airlines find qualified crew members. Customers include commercial airlines, private jet operators, and helicopter companies, who pay for these training solutions to ensure their staff are highly skilled and safe.
Defense and Security
In this part of the business, CAE focuses on preparing military and security forces for real-world situations through advanced training and simulation. They develop systems that mimic complex scenarios, helping defense forces, government agencies, and public safety organizations enhance their readiness and operational capabilities. This can include training for pilots of military aircraft, ground crews, and personnel involved in various security operations, ensuring they are well-prepared for their missions.
What management is betting on now
CAE's current strategy revolves around expanding its training and simulation offerings in both its civil and defense markets. The company is investing in digital solutions to make training more efficient and accessible, aiming to capture a larger share of the growing demand for skilled aviation professionals. In defense, CAE is focused on providing scalable, adaptable training systems that meet the evolving needs of modern military forces, including a growing emphasis on unmanned and autonomous systems. This strategic focus aims to solidify CAE's position as a key technology partner for safety and readiness across critical industries.
Price history
How the share price has moved
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Is it cheap or expensive?
Fair value $20.16 vs current price $26.85
Wall Street consensus is the average analyst price target: $32.80 (62.7% higher than our fair-value estimate).
Our most-likely fair value is $20.16 a share — about 24.9% away from today's price of $26.85, so the stock currently looks fairly priced.
Is it drowning in debt?
Stretched
Net debt $1.9B. Interest coverage 3.3x.
Net debt
$1.88B
Interest coverage
3.34x
CAE Inc.'s profit covers its interest bill about 3.3 times over. which is weaker than most peers shown here.
Stretched
Worse cushion
Baseline
Better cushion
CAE
BASELINE
CAE Inc.
Total debt $2.28B Interest coverage 3.34x This is the baseline the peer rows are being compared against.
Total debt $11.00B Interest coverage 3.60x +8% vs CAE Has roughly the same debt cushion as CAE.
Total debt $4.21B Interest coverage 7.94x +138% vs CAE Carries about 2.4x more debt cushion than CAE.
Total debt $1.14B Interest coverage 14.79x +343% vs CAE Carries about 4.4x more debt cushion than CAE.
Total debt $2.70B Interest coverage 4.07x +22% vs CAE Carries about 1.2x more debt cushion than CAE.
What you should know
The case for and against CAE
2 Rewards
3 Risks
Rewards
-
Revenue grew 4.4% last year.
-
Free cash flow was positive in 3/10 years.
Risks
-
Stock trades 60.2% above its 5-year average P/E.
-
Operating margin compressed from 11.2% to 10.1% over 3 years.
-
Insider ownership is only 0.0% (peer median: 0.7%).
The numbers
All the key metrics, grouped by purpose
Tap any ? icon to learn what it means.
Valuation
How expensive the stock looks
P/E (TTM)
41.95x
Forward P/E
25.44x
P/B
2.24x
P/S
1.72x
EV/EBITDA
12.20x
PEG ratio
1.83x
Profitability
How much profit each dollar creates
Gross margin
28.6%
Operating margin
10.1%
Net margin
5.8%
ROE
5.6%
ROA
3.5%
Health
Liquidity and balance-sheet strength
Debt / equity
0.59x
Current ratio
0.83x
Quick ratio
0.61x
Total debt
$2.28B
Total cash
$403.20M
Growth
How the business has been compounding
Revenue TTM
$3.54B
Revenue 5Y CAGR
7.0%
EPS TTM
0.64
EPS 5Y CAGR
11.5%
Cash flow
How much cash the business throws off
Operating CF TTM
$561.45M
Free CF TTM
$305.15M
FCF margin
8.6%
Dividend
Shareholder payout
Yield
0.0%
Payout ratio
0.0%
Last ex-div date
2020-03-12