CAE INC. $10 - Toronto symbol CAE

CAE INC. $10 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 258.3 million; Market cap: $2.6 billion; Price-to-sales ratio: 1.4; Dividend yield: 1.6%; TSINetwork Rating: Average; www.cae.com) spends around 10% of its annual revenue of $1.8 billion on research. That helps it develop simulators for new planes, like the Boeing 787 Dreamliner and Airbus A380. The company is also using these funds to apply its expertise to new fields.

For example, CAE is now making simulators and other products, including lifelike mannequins, to train paramedics and medical students. It is also focusing on the mining industry: Right now, mining firms are using software that CAE developed to plan new mines and measure reserves. These new businesses, which both have strong growth potential, now supply 5% of CAE’s revenue.

The stock trades at 12.7 times the $0.79 a share that CAE will probably earn in its 2013 fiscal year, which ends March 31, 2013. The $0.16 dividend yields 1.6%.

CAE is a buy.

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Vernon Jones

Vernon is a managing editor at TSI Network, working with a team of analysts and reporters to develop editorial content focused on Canadian investors. An award-winning journalist, Vernon has years of general and business reporting experience at five of North America’s major dailies, including the Globe and Mail, Wall Street Journal and the Chicago Sun-Times. He was also business editor for one of North America’s oldest newspapers. He led the development of ten national business-to-business magazines, including Wealth Professional and Insurance Business Canada. The Toronto native is a graduate of Toronto Metropolitan University’s school of journalism, and holds a master’s degree from the University of Illinois at Urbana-Champaign.

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