CAE INC. $7.39 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 254.9 million; Market cap: $1.9 billion; Price-to-sales ratio: 1.3; SI Rating: Average) is a leading maker of flight simulators. It also provides pilot-training services in 20 countries. CAE gets 90% of its revenue from customers outside of Canada.
The slowing economy could hurt simulator demand from airlines, which operate in a cyclical industry. However, CAE’s growing military operations help cut its risk. In fact, the company recently won several new military-related contracts worth a total of $80 million. Military operations account for 45% of CAE’s revenue.
In its third fiscal quarter ended December 31, 2008, CAE’s revenue rose 23.1%, to $424.6 million from $344.8 million a year earlier. Earnings improved 32.9%, to $53.3 million from $40.1 million. Earnings per share rose 31.3%, to $0.21 from $0.16. CAE typically spends around 6% of its revenue on research.
CAE’s total debt of $463.7 million is just 1.6 times its annual cash flow. It also holds cash of $197.8 million, or $0.80 a share. The stock now trades at 10.1 times its CAE’s likely 2009 earnings of $0.73 a share. The $0.12 dividend yields 1.6%.
CAE is a buy.
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