CAE Inc. (TSE:CAE), which is in the aerospace & defense business, and is based in Canada, maintained its current share price over the past couple of month on the TSX, with a relatively tight range of CA$33.12 to CA$36.37. However, does this price actually reflect the true value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at CAE’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is CAE worth?
According to my valuation model, CAE seems to be fairly priced at around 5.35% above my intrinsic value, which means if you buy CAE today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is CA$31.54, then there isn’t really any room for the share price grow beyond what it’s currently trading. What's more, CAE’s share price may be more stable over time (relative to the market), as indicated by its low beta.
What kind of growth will CAE generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 33% over the next couple of years, the future seems bright for CAE. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has already priced in CAE’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on CAE, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on CAE. You can find everything you need to know about CAE in the latest infographic research report. If you are no longer interested in CAE, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.