CAE Inc (TSX:CAE), a aerospace & defense company based in Canada, saw a double-digit share price rise of over 10% in the past couple of months on the TSX. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s take a look at CAE’s outlook and value based on the most recent financial data to see if the opportunity still exists. See our latest analysis for CAE
Is CAE still cheap?
The stock is currently trading at CA$24.62 on the share market, which means it is overvalued by 24% compared to my intrinsic value of CA$19.88. Not the best news for investors looking to buy! Furthermore, CAE’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
Can we expect growth from CAE?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by a double-digit 10.33% over the next couple of years, the outlook is positive for CAE. It looks like higher cash flows 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 well and truly priced in CAE’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe CAE should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on CAE for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for CAE, which means it’s worth diving deeper into other factors 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.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.