Valuing CAE (TSX:CAE) After Securing Saab Partnership in Global Defense Training and Simulation

CAE (TSX:CAE) has just landed a significant global partnership, becoming Saab’s preferred supplier for training and simulation with a direct focus on the GlobalEye Airborne Early Warning and Control platform. The agreement opens doors for CAE to jointly pursue major defense programs, such as Canada’s AEW&C initiative.

See our latest analysis for CAE.

Momentum around CAE has been steadily building, reflecting confidence in its transformation and deeper push into global defense. Despite a volatile month for the share price, CAE’s 12.9% total shareholder return over the past year and 27.9% gain over three years suggest investors continue to bet on long-term growth as new partnerships and an earnings uptick take hold.

If the recent aerospace moves have sparked your curiosity, explore other defense and simulation innovators with our aerospace and defense discovery screener using See the full list for free.

The recent news has driven optimism, but with CAE trading below analyst targets, investors may wonder if the stock is offering a genuine value opportunity or if the market has already factored in all future growth from these developments.

Most Popular Narrative: 15.1% Undervalued

With CAE’s consensus fair value estimated at CA$43.31 and its latest closing price at CA$36.78, the narrative sees meaningful upside potential and sets specific expectations for growth and profitability. Here’s what drives that perspective.

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. This trend is expected to positively impact net margins and recurring cash flow.

Read the complete narrative.

Are high-tech partnerships enough to spark sustainable growth? The narrative’s bullish outlook is fueled by ambitious forecasts for earnings, cash flows, and margins. These numbers may surprise you. Want to see what powers this price target? Discover the bold projections that underpin the case for CAE’s next act.

Result: Fair Value of $43.31 (UNDERVALUED)

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

However, persistent margin pressures and uncertainty around global economic conditions remain real risks that could quickly alter CAE’s growth outlook.

Find out about the key risks to this CAE narrative.

Another View: What Does Our DCF Model Say?

While the fair value estimate based on market multiples suggests upside for CAE, the SWS DCF model reveals something even more striking. By projecting future cash flows, the DCF model values CAE at CA$66.31, which is far above today's price and indicates a deeper level of undervaluation. Which method should investors trust more?

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

Build Your Own CAE Narrative

If you want to take the analysis into your own hands or see the numbers from a different perspective, you can quickly build your own story in just a few minutes. Do it your way

A great starting point for your CAE research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

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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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