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Patrick McKeough is one of Canada’s top safe-money advisors. The Wall Street Journal, Forbes and The Hulbert Financial Digest have all recognized his ability to find stocks with hidden value. He is editor and publisher of The Successful Investor, Stock Pickers Digest, Wall Street Stock Forecaster and Canadian Wealth Advisor; inventor of the Quick Profit/Value System and the ValuVesting System™. A best-selling Canadian author, he wrote Riding the Bull, the book that predicted the 1990s stock-market boom.

CAE INC. $9.67 – Toronto symbol CAE

October 21, 2011 -  Be the first to comment
Posted by: Pat McKeough Filed in: Conservative Investing
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CAE INC. $9.67 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 257.2 million; Market cap: $2.5 billion; Price-to-sales ratio: 1.5; Dividend yield: 1.7%; TSINetwork Rating: Average; www.cae.com) makes military and airline flight simulators. It also runs pilot-training schools.

CAE continues to apply its simulator expertise to new fields, such as medical training. It recently bought Florida-based Medical Education Technologies, Inc. (METI), which makes medical simulators and other products, including life-like mannequins, for training paramedics and medical students.

Since 1996, METI has sold about 6,000 simulators to medical schools in 40 countries. This purchase will add $60 million U.S. to CAE’s annual revenue of $1.6 billion (Canadian).

CAE paid $130 million U.S. for METI. To finance this purchase, CAE sold $150 million U.S. of new long-term notes. On June 30, 2011, the company’s long-term debt was $533.3 million (Canadian), or 21% of its $2.5-billion market cap, so it has plenty of room to borrow more funds.

The company will probably earn $0.69 a share in its current fiscal year. The stock trades at a reasonable 14.0 times that estimate.

CAE is a buy.

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