CAE INC. $15 - Toronto symbol CAE

strong>CAE INC. $15 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 263.2 million; Market cap: $3.9 billion; Price-to-sales ratio: 1.8; Dividend yield: 1.6%; TSINetwork Rating: Average; www.cae.com) recently sold five flight simulators to Southwest Airlines, Lufthansa and other customers.

In all, these orders are worth $75 million. That’s equal to 3% of CAE’s annual revenue of $2.2 billion.

Including these deals, CAE has sold 48 simulators in its 2014 fiscal year, which ended March 31, 2014. That’s up 37.1% from the 35 it sold in 2013. It also beats the company’s previous all-time high of 38 simulator sales in fiscal 1998.

Demand for flight simulators should remain strong in fiscal 2015. Many airlines are replacing their aging fleets with new, more fuel-efficient models. That will also spur long-term demand for CAE’s pilot-training services.

As well, many of these simulator customers require ongoing support services, such as maintenance and software updates. This generates steady revenue that cuts CAE’s reliance on selling new simulators.

Meanwhile, the company continues to win orders for flight simulators and related services from military clients. CAE gets 40% of its revenue from its military-related businesses, which makes it less dependent on cyclical commercial airlines.

CAE is our #1 buy for 2014.

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