CAE (TSX:CAE) is a global leader in training for the civil aviation, defence, and healthcare industries. The company has a long history of providing high-quality training solutions, and its products and services are used by customers in over 150 countries.
As Canadians continue to be concerned in the current economic environment, here is why CAE stock might be a solid stock to consider.
A strong stock in hard times
CAE stock has proven to be a solid hold, even during economic downturns. For example, during the 2008 financial crisis, CAE’s stock price fell by only 20%, while the broader market fell by over 50%. This is because CAE’s products and services are essential for the continued safety and efficiency of the aviation and defence industries.
In recent years, CAE stock has been growing its business through acquisitions and organic growth. In 2019, the company acquired SimuFlite, a leading provider of flight simulation training solutions. Then in 2020, CAE acquired CAE Healthcare, a leading provider of healthcare simulation solutions.
Note that these acquisitions occurred during first a financially difficult situation, when a recession was thought to be imminent, and during the pandemic. This alone shows the support that CAE stock has in its balance sheet to make such large acquisitions.
Earnings remain strong
CAE stock’s most recent earnings report was released on May 31, 2023. The company reported revenue of $1.26 billion, up 32% year over year for the quarter. Revenue came in at $4.2 billion for the year, up 25% compared to 2022 levels. Earnings per share nearly doubled to $0.31 per share for the quarter, with operating income doubling to $186.6 million. As for the year, adjusted earnings per share came in at $0.88, up slightly, though operating income nearly doubled to $474 million.
“CAE delivered an excellent performance in the fourth quarter with over 40% adjusted segment operating income growth, which led to 23% growth for the year as a whole…We also expanded our global reach and secured future growth with a record $5.0 billion in annual orders, for a record $10.8 billion adjusted backlog … Over the course of the year, we made significant progress to set the stage for a much larger future business and to transform our industry through digital technology innovation and thought leadership.”
Marc Parent, CAE’s president and chief executive officer
Analysts on board
Analysts are generally positive on CAE stock. In a recent research note, Canaccord Genuity analyst Benjamin Smith reiterated his “Buy” rating on the stock, saying, “We believe CAE is well-positioned to benefit from the continued growth of the global civil aviation and defense markets.”
Based on metrics, such as the price-to-earnings ratio at 41.45, price-to-sales ratio at 2.23, and enterprise value to earnings before interest and taxes of 15.67, CAE stock is currently trading at a reasonable valuation compared to historic levels. The company’s share price has grown by over 50% over the past decade, and it is expected to grow by another 10% in the next year based on consensus analyst estimates.
Overall, CAE stock is a defensive stock that is well- positioned for growth in the years to come. The company has a strong track record of profitability, and its products and services are essential for the continued safety and efficiency of the aviation and defence industries.
