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 [1]) 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.