Assessing CAE's (TSX:CAE) Valuation After Joby Aviation eVTOL Simulator Breakthrough

Interest in CAE (TSX:CAE) has picked up after Joby Aviation accepted the first of two high-end flight simulators built with CAE. These simulators are aimed at commercial single-pilot eVTOL training under top-tier FAA classifications.

See our latest analysis for CAE.

The recent simulator milestone with Joby comes as CAE's share price sits at CA$45.31, with a 30-day share price return of 17.47% and a 1-year total shareholder return of 33.15% that together suggest building momentum rather than a short-lived spike.

If this kind of aviation tech story has your attention, it could be a good moment to look at other aerospace and defense stocks that might fit a similar theme in your portfolio.

With CAE trading at CA$45.31, slightly above the average analyst price target but showing an intrinsic discount estimate of about 31%, it raises a key question for investors: is there still an opportunity here, or is the market already pricing in future growth?

Most Popular Narrative Narrative: 3.2% Overvalued

With CAE closing at CA$45.31 against a fair value estimate of about CA$43.92, the most followed narrative points to only a modest premium.

The analysts have a consensus price target of CA$42.667 for CAE based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$50.0, and the most bearish reporting a price target of just CA$30.0.

Read the complete narrative.

Want to see what justifies a higher future earnings base and a richer P/E multiple than the broader sector? The narrative leans heavily on steady growth assumptions, margin uplift and a relatively low discount rate to keep that fair value supported. Curious how those ingredients fit together in the model?

Result: Fair Value of CA$43.92 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, you still need to weigh CAE's sizeable CA$3.2b net debt, along with the risk that softer civil training demand or slower defense orders could strain those margin hopes.

Find out about the key risks to this CAE narrative.

Another View: SWS DCF Points to Upside

While the popular narrative flags CAE as about 3.2% overvalued versus a fair value of CA$43.92, the SWS DCF model lands in a very different place, with a fair value estimate of CA$65.48. At today’s CA$45.31 price, that suggests a sizeable gap. Which set of assumptions do you find more realistic?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out CAE for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 881 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own CAE Narrative

If you see the numbers differently or prefer to test your own assumptions, you can build a full CAE narrative in minutes by starting with Do it your way.

A great starting point for your CAE research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

Looking for more investment ideas?

If CAE has sharpened your interest, do not stop here. The same tools that framed this story can help you spot your next opportunity before everyone else.

• Target potential mispricings by reviewing these 881 undervalued stocks based on cash flows and see which companies currently trade at prices that differ from their cash flow profiles.
• Explore new technology by scanning these 28 AI penny stocks that focus on artificial intelligence across different parts of the market.
• Add income potential to your watchlist through these 11 dividend stocks with yields > 3%, focusing on companies with yields above 3% that may suit a more cash focused approach.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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