CAE is a buy, this portfolio manager says

Flight simulator firm CAE (CAE Stock Quote, Chart TSX, NYSE:CAE) has had a good run over the last couple of years, but there’s likely more upside left, says portfolio manager Michael Sprung.

“It’s a company that’s always been extremely well-managed,” says Sprung, President of Sprung Investment Management, to BNN Bloomberg. “Over the years, they’ve tried to diversify from time to time out of just the flight simulation business and they have very successfully transferred that now into pilot training. I wouldn’t hesitate to own it.”

CAE posted strong top and bottom lines in its November quarterly report, the company’s fiscal second quarter, 2019, which featured revenue of $743.8 million, a 20 per cent year-over-year increase, and net income attributable to shareholders of $60.7 million, up one per cent from a year prior.

The company also made a big move last month in buying Bombardier’s business aircraft training business for US$645 million along with securing a US$170-million training agreement with British discount carrier easyJet.

“CAE had a good performance in the second quarter with double-digit earnings growth, strong free cash flow, and a record order backlog,” said Marc Parent, CAE’s President and CEO, in the company’s Q2/2019 press release. “I am especially pleased with the continued progress of our training strategy as demonstrated by $986 million in orders in the quarter and two important announcements last week, involving the acquisition of Bombardier Business Aircraft Training to expand our position in the business aviation training market, and a major airline outsourcing with easyJet.

The stock has more than doubled over the past five years, hitting a new high of $28.15 on June 13 of this year. CAE dipped with the rest of the market in October and early November before rebounding on the back of its Q2 report. It now sits seven per cent off its June high and up 11 per cent for the year.

“It has gone up quite a bit but there are periods where you have good opportunities to buy this company and it’s one I would highly recommend it as a company to look at,” says Sprung.