Last Update 27 Jan 26

Fair value Increased 5.36%

CAE: Future Training Contracts And Mixed Execution Will Shape Balanced Long-Term Returns

The updated analyst price target for CAE rises by about $2.40, reflecting more supportive Street research that includes higher targets from several firms and slightly stronger modeled profitability and P/E assumptions.

Analyst Commentary

Recent Street research on CAE has focused on where the share price could settle relative to updated profit assumptions and P/E inputs, with several firms revisiting their targets over the past few months.

Bullish Takeaways

Bullish analysts have moved their targets toward the low C$50s, which suggests they see room in their models for higher earnings contribution and support for a richer P/E than previously assumed.
Successive upward revisions from the low to mid C$40s and then into the C$50 range signal more confidence in execution, particularly around CAE meeting internal profitability and margin expectations that justify those targets.
Where ratings are kept at Buy alongside higher targets, it reflects ongoing comfort that the current share price, versus the revised target range, still leaves a valuation gap in their models.
The cluster of higher targets over a relatively short period gives investors a reference band for what more optimistic scenarios could look like if management delivers on its operating plans.

Bearish Takeaways

Bearish analysts have adjusted their target toward C$40 and kept more neutral ratings, signaling caution around how much upside they see relative to execution risks.
The decision to trim a target rather than raise it suggests that, in some models, expectations for profitability or growth have been recalibrated, which can cap how high a justified P/E multiple runs.
Maintaining a Sector Perform stance indicates a view that CAE may trade broadly in line with peers, rather than meaningfully above them, if the company delivers in a more measured way.
For investors, the gap between the cautious C$40 area and the higher C$50 range highlights the spread of opinion on both execution risk and how much value is already reflected in the current share price.

What's in the News

CAE appoints Ryan McLeod, CPA, CA, as Chief Financial Officer effective February 23, 2026, with a planned transition from interim CFO Constantino Malatesta and a mandate to lead the global finance organization and support operational execution (Key Developments).
Joby Aviation accepts the first of two high fidelity eVTOL flight simulators developed with CAE, with FAA qualification targeted at Level 7 Flight Training Device and Level C Full Flight Simulator classifications, using CAE Prodigy image generation and AI driven 3D urban environments for pilot training (Key Developments).
CAE secures a contract valued at more than C$270 million with the Commonwealth of Australia to deliver the Future Air Mission Training System for the Royal Australian Air Force under Project AIR5428 Phase 3, covering an initial 10 year performance period and supporting multiple mission aircrew roles at RAAF Base East Sale (Key Developments).
The Future Air Mission Training System contract is expected to initially create over 40 skilled jobs for CAE in Victoria, Australia, with first student graduations from the program targeted for 2028 (Key Developments).
From July 1, 2025 to September 30, 2025, CAE completes a share buyback tranche of 61,900 shares, representing about 0.02% of the company, for a total of C$2.28 million under the program announced June 6, 2025 (Key Developments).

Valuation Changes

Fair Value: risen slightly from CA$44.46 to CA$46.85, implying a modestly higher central estimate in the model.
Discount Rate: edged down from 7.09% to 7.03%, a small change that slightly increases the weight on future cash flows.
Revenue Growth: eased from 6.03% to 5.81%, reflecting a more measured top line assumption in the updated scenario.
Profit Margin: moved marginally higher from 10.06% to 10.12%, pointing to a slightly stronger profitability profile in the model.
Future P/E: increased from 30.71x to 32.30x, indicating a somewhat richer multiple assumption applied to CAE’s earnings outlook.

Continued air travel and defense sector demand, along with technological innovation, provides CAE with strong opportunities for recurring, high-margin revenue growth.
Expansion into business aviation and healthcare simulation diversifies income streams and reduces exposure to industry cycles.
Elevated financial risk, sectoral demand uncertainties, and integration challenges could hamper CAE's profit stability, flexibility, and realization of anticipated operational and margin improvements.

Catalysts

About CAE

Provides training, simulation, and critical operation solutions in Canada, the United States, the United Kingdom, Europe, Asia, the Oceania, Africa, and rest of the Americas.What are the underlying business or industry changes driving this perspective?

The upcoming surge in global air travel demand, reflected by record aircraft OEM backlogs and forecasts for a near doubling of the global fleet over 20 years, positions CAE to benefit from a sustained need for pilot training; this underpins a robust long-term runway for top-line revenue and earnings growth.
Accelerating adoption of digital, immersive, and simulation technologies-exemplified by CAE's recent partnerships with Apple and rollout of its Flightscape analytical platform-positions the company to capture new, higher-margin, and recurring revenue streams as the industry modernizes and airlines seek efficiency, positively impacting net margins and recurring cash flow.
Rising defense spending across NATO, the EU, and Canada, combined with global modernization initiatives, is driving strong demand for simulation-based military training-a trend reflected in CAE's record defense backlog, multi-year contract wins, and opportunity pipeline, suggesting meaningful visibility into growing revenues and margin expansion.
Strategic program execution and operational discipline-highlighted by focus on optimizing recently built capacity, driving cost efficiencies, and replacing lower-margin legacy defense contracts with accretive ones-should translate into stronger margin performance, improved cash conversion, and higher returns on invested capital over time.
CAE's growing footprint in business aviation and healthcare simulation, bolstered by targeted acquisitions and new training centers, diversifies revenue sources beyond commercial airlines, reduces cyclicality, and enhances long-term EPS growth potential.

CAE Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming CAE's revenue will grow by 5.1% annually over the next 3 years.
Analysts assume that profit margins will increase from 8.7% today to 10.6% in 3 years time.
Analysts expect earnings to reach CA$582.0 million (and earnings per share of CA$1.7) by about September 2028, up from CA$414.2 million today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 29.6x on those 2028 earnings, up from 28.5x today. This future PE is greater than the current PE for the US Aerospace & Defense industry at 28.5x.
Analysts expect the number of shares outstanding to grow by 0.67% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.26%, as per the Simply Wall St company report.

CAE Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

CAE's high debt load (net debt at $3.2 billion and net debt to adjusted EBITDA at 2.75x) and ongoing capital intensity from recent acquisitions and growth investments elevate financial risk, potentially constraining future capital allocation, slowing deleveraging, and limiting flexibility for further investment, which could impact net margins and future earnings.
Civil aviation training utilization is experiencing softness due to transient pilot hiring pauses and cautious airline planning; if delays in commercial pilot demand or prolonged economic or demographic drags materialize, long-term recurring revenues and profit growth in this key segment could be lower than expected.
A significant portion of Civil profits comes from business aviation, which is somewhat cyclical and dependent on high-net-worth individual trends; a downturn in this market segment or waning demand for business aircraft/fractional ownership could negatively affect revenue stability and consolidated net margins.
CAE's defense business is benefiting from a current global upcycle in military spending, but this segment remains vulnerable to long-term risks from shifting government budget priorities, procurement process uncertainties, and potential defense spending slowdowns, especially as investments may be reprioritized in favor of new technologies or geopolitics shift, leading to lumpier or lower future order intake and margin volatility.
The company's operational focus on efficiency, cost control, and integration of recent acquisitions (such as full integration of SIMCOM and defense contracts) faces execution risk; if synergy realization or cultural/operational harmonization falters, anticipated improvements in operational margins, cash flow conversion, and earnings may not fully materialize.

Valuation

How have all the factors above been brought together to estimate a fair value?

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.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CA$5.5 billion, earnings will come to CA$582.0 million, and it would be trading on a PE ratio of 29.6x, assuming you use a discount rate of 7.3%.
Given the current share price of CA$36.83, the analyst price target of CA$42.67 is 13.7% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

Have other thoughts on CAE?

Create your own narrative on this stock, and estimate its Fair Value using our Valuator tool.

Create Narrative

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Global Digital Simulation Advances Will Expand Air And Defense Training