CAE Inc. still looks like a buy: Keith Richards

Aircraft simulation company CAE Inc. (CAE Stock Quote, Chart, News: TSX:CAE) has been on a terrific run over the past few years, and there’s no reason why the party shouldn’t continue, says portfolio manager Keith Richards with ValueTrend Wealth Management.

The share price for Montreal-based CAE is up 24 per cent over the past 12 months, rising 17 per cent year to date. That impressive growth includes a 5.2 per cent jump on May 25 when the company reported revenue for its fiscal Q4/18 of $780.7 million, a six per cent increase from the fourth quarter last year, and earnings per share of 37 cents, beating the Street’s expectations of 32 cents.

“CAE’s training strategy is proving successful as evidenced by our strong performance in the fourth quarter and fiscal year 2018 and our delivery on our growth outlook across all segments,” said Marc Parent, CAE President and CEO, in a statement. “I am especially pleased with our increased momentum to be the recognized global training partner of choice, as underscored by a record $3.9 billion annual order intake and $7.8 billion backlog.”

But with all that success, the stock may be getting a bit ahead of itself, says Richards, who argues that despite the high valuation, there still could be upside to CAE.

“It’s a great company,” Richards told BNN Bloomberg. “We sold it when it started to trade sideways. It’s had a decent move recently, so typically you might see a bit of a pullback. It’s probably a little overbought.”

When the economy is doing well and Canadians are travelling by air more often, not only do the airlines receive a boost, but the larger aerospace industry benefits — including CAE.

“I wouldn’t wait too, too long,” says Richards. “Just let it pull back a buck-and-a-half and then I’d be in on it. As far as a target, technically, there’s no overhead resistance, really, so you can just let it ride for as long as it wants to go up. It’s a great looking chart.”