CAE INC. (CAE): what the price assumes

In the published model solve dated 2026-Q2, anchored at $26.83, CAE INC. (CAE) is priced for +14.7% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-08-10 · Exported: 2026-08-12 · Source: https://boothcheck.com/report/CAE

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 8.9% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7pp.

How unusual the bet is: within-range

Valuation X-Ray

The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.3%); the inversion above states its own rate.

Per-Model Detail (n=16)

Economic-Unit Decomposition (Sum Of The Parts)

Only one reportable economic unit is present in the current topology source. Consolidated operating lenses remain available, but there is no multi-unit decomposition.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Bullet Takeaways

• The larger half of this business is not the hardware: training, software and services carry about 59% of revenue against 41% for products, which is the difference between selling a simulator once and being paid to run it for years afterward.
• The capital structure is the specific risk: net borrowings of roughly 2.24 billion dollars leave interest covered about 3.1 times, and the share count has grown about 4.1% a year since March 2021, so lenders and existing holders have both been funding the expansion.
• Fiscal first-quarter results land on August 12, 2026, on the back of a July run of defence training awards including a U.S. Army contract valued at up to $257.89 million.

Bull Case

A screen that ranks companies by what they earn on their own book will not stop here for long. Return on equity ran about 8.3% over the trailing year against a cost of equity near 9.3%, and on that arithmetic the business looks like it is running to stand still. The trouble with reading it that way is that the book is mostly steel and buildings, and the steel is not where the money is made.

What this company actually does is place a device inside a training network and then get paid for the hours flown on it. Training, software and services is the larger revenue line at about 59% of the total; products, meaning the simulators themselves, account for the other 41%. Those two lines have completely different shapes. Selling a simulator is a one-time event with a manufacturing margin attached. Training on it is an annuity that lasts as long as the aircraft type stays in service, which in commercial aviation means decades. The balance sheet records the first and largely ignores the second, because a training relationship is not an asset you can capitalize.

The switching costs behind that annuity are stronger than the accounting suggests. A pilot is certified on a specific aircraft type in a specific qualified device, and an airline that runs its recurrent training through one network does not casually move it: the regulatory approvals, the courseware and the scheduling all have to move with it. That is why capacity, once placed, tends to stay busy rather than being re-bid every year.

The defence side works the same way and is where the near-term momentum sits. In July the company took a U.S. Army award valued at up to $257.89 million for Bombardier Global 6500 pilot training, announced an M-346 training system collaboration with Leonardo, and signed a memorandum of understanding with Saab covering Gripen fighter training. Military training programs run for years once awarded, and they are awarded around aircraft platforms that stay in service for decades.

None of which would matter if the price demanded heroics. It does not quite. At $25.18 the market is capitalizing the company at roughly 19 times its annual operating profit, which embeds company-wide operating growth of about 12.3% a year over a five-year stage. Revenue grew about 12.2% over the trailing period, so the required rate is not above what the business has recently delivered. Roughly 56% of comparable fast-growing companies have held such a pace for five years, which for this kind of bet is unusually close to even odds.

Cash generation supports the wait. Free cash flow ran near 397 million dollars over the trailing period, roughly a twentieth of what the equity is worth today, and the business funds itself rather than drawing down its own resources. That is a real yield on a company whose largest revenue line renews itself.

Bear Case

The fragility here is in how the growth was financed, and it shows up in two places at once. Net borrowings sit near 2.24 billion dollars, leverage runs about 4.4 times operating profit measured on the annual figures, and interest is covered about 3.1 times. Meanwhile the share count has risen about 4.1% a year between March 2021 and March 2025. Debt and equity have both been used to fund the build, which means the per-share progress has been slower than the company-level progress for four straight years.

That combination is specifically fragile because of what the assets are. Simulators and training centres are long-lived fixed capital with fixed financing behind them. When an airline defers a training contract or a defence program slips a budget cycle, the utilization falls immediately and the interest bill does not. Coverage near three times is adequate in a normal year and becomes the whole conversation in a bad one. This is the profile that forces companies to issue equity at exactly the moment they least want to, and the share-count trajectory shows the pattern is already established.

Underneath the financing question is a returns question the bull case has to answer eventually. The company earned about 7.2% on invested capital over the trailing year against a cost of that capital near 8.3%, and about 8.3% on equity against a 9.3% cost of equity. Both spreads are negative. When a business earns less on capital than the capital costs, growth is not automatically good news; each incremental dollar deployed at those returns quietly subtracts a little value even as revenue climbs. Expansion in that condition needs the returns to improve, not just the revenue.

That is why the price sits where it does relative to the sober methods. The quoted price is roughly 155% above where the asset-based approaches land and roughly 144% above the earnings-power approaches. Only the peer-multiple work, which lands just under the current quote, and the forward cash-flow work reach today's level. The price therefore rests entirely on the forward path: company-wide operating growth of about 12.3% a year sustained across five years. Just over half of comparable fast-growers have managed that. If this one lands in the other half, the support falls back to methods that sit far below the current quote, and the compression does not require anything dramatic to happen. It only requires the growth to be ordinary.

The floor under that scenario is thin. The company holds roughly 394 million dollars of equity stakes outside its operating businesses, about 4.9% of market value, or a bit over a dollar a share. That is a real boundary on the downside rather than a rounding error, but against a price above twenty-five dollars it is not much of a cushion.

There is also a cyclicality the annuity framing can obscure. Recurrent pilot training is steady; new simulator orders and new training centre capacity are not. Airlines cut capital commitments before they cut flying, and defence ministries reschedule programs when budgets tighten. Both hit the products line first, and products is 41% of revenue.

Valuation

At $25.18 the market is capitalizing this company at roughly 19 times its annual operating profit, and that price embeds company-wide operating growth of about 12.3% a year across a five-year stage. The rate itself is not extreme: revenue grew about 12.2% over the trailing period, so the market is asking the business to keep doing what it has recently been doing. The demanding part is the duration. Roughly 56% of comparable fast-growing companies sustained that pace for five years, which makes this close to a coin flip rather than a long shot.

The methods split cleanly on why. The price stands roughly 155% above where the asset-based approaches land and roughly 144% above the earnings-power approaches. It sits about 4% above the peer-multiple work, and the forward cash-flow approaches reach above it. Read together, this is a price supported by what the business is expected to generate and by what comparable companies fetch, and not at all by the accounting base underneath it.

The cash-flow route is worth describing because it is the one doing the work. The perpetual-growth version starts from a free cash flow base near $0.4 billion, compounds it about 12% a year through a six-year projection, then fades to 4% terminal growth discounted at an 8.3% cost of capital, and on that path it lands above today's quote. The exit-multiple version reaches a similar place by holding today's enterprise-to-EBITDA exit multiple flat through year six. Both are legitimate constructions and both share one dependency: the growth has to show up.

What the asset-based methods are reacting to is not pessimism about the business but arithmetic about the returns. Return on equity ran about 8.3% against a cost of equity near 9.3%, and return on invested capital about 7.2% against a cost of capital near 8.3%. A company earning slightly less than its capital costs cannot be worth a large premium to its book on book-based logic alone, which is exactly what those methods are reporting. The premium in the quote is a statement about the training annuity, not about the balance sheet.

The revenue mix is the reason that annuity is credible. Training, software and services is the larger line at about 59% of revenue, with products at 41%. Recurring training revenue behaves very differently from simulator sales, and the multiple sits in the lower half of the comparable range despite that mix.

Solvency is what limits the room for error. Net borrowings near 2.24 billion dollars put leverage at about 4.4 times operating profit on the annual figures, with interest covered about 3.1 times, and the share count rising about 4.1% a year since March 2021. Roughly 394 million dollars of equity stakes sit outside the operating businesses as a separate boundary on the downside. The business is not burning cash, but between the fixed charges and the rising share count, a growth path that arrives two years late costs the shareholder twice: once in the missing growth, and once in the equity issued while waiting for it.

Catalysts

July was busy on the defence side. The company disclosed a U.S. Army contract valued at up to $257.89 million for Bombardier Global 6500 pilot training, a collaboration with Leonardo on the M-346 training system, and a memorandum of understanding with Saab covering Gripen fighter training solutions. A memorandum of understanding is not a contract, and an award ceiling is not booked revenue, but all three point at the same demand: European and U.S. militaries buying training capacity around platforms already in service.

Two housekeeping items matter more than they look. The company is moving its U.S. listing from the New York Stock Exchange to the Nasdaq Global Select Market, and Morgan Stanley cut its rating to Underweight in mid-July. The downgrade is the more informative of the two, because it lands in the same month as the award flow and therefore reflects a view about conversion and financing rather than about demand.

Fiscal first-quarter results are scheduled for August 12, 2026. Two lines are worth checking before any headline number: whether the July awards show up as backlog, and whether the share count has stopped climbing.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

• TLN (Talen Energy Corporation)
• FY2025 10-K: …counterparties, including RTOs/ISOs, PPA counterparties, other customers, commercial counterparties, and other parties to whom we supply certain products or services, as well as by other market participants whose defaults could indirectly impact our business. Although we have established policies and procedures to…
• FY2025 10-K: …may also provide alternative methods to produce, dispatch, and store power, which could also lead to increased overall electricity supply. Any of these factors could impact the dispatch, capacity factors, and value of our generation facilities. We face intense competition in the competitive power generation market.…
• ONON (On Holding AG)
• FY2025 20-F: …other things: • economic downturns in a particular area; • competition from nearby retailers selling athletic apparel; • changing consumer demographics in a particular market; Ta ble of Co nt en t s • changing lifestyle choices of consumers in a particular market; and • the closing or decline in popularity of other…
• FY2025 20-F: …If actual or expected future returns significantly differ than the refund liability established, a corresponding adjustment to net sales and cost of sales is recorded in the period in which such determination was made. 2.2 Segment information Operating segments are defined as components of an entity that engage in…
• ASTH (ASTH)
• FY2025 10-K: …that the assessment is made. Other Revenue Other revenue primarily encompasses revenue earned from maternity care and Hospital Quality Assurance Program ("HQAF"). Other revenue is recognized when services are rendered, or over the period, generally on a monthly basis, in which the Company is obligated to provide…
• FY2025 10-K: …loss to the extent such loss exceeds the FDIC insurance limitation, which could have a material adverse effect on our liquidity, financial condition, and results of operations. 42 Table of Contents Risks Relating to the Healthcare Industry . The healthcare industry is highly competitive. We compete directly with…
• CPA (CPA)
• FY2025 20-F: …Airlines compete in the areas of pricing, scheduling (frequency and flight times), on-time performance, frequent flyer programs and other services. Strategic alliances, bankruptcy restructurings and industry consolidations characterize the airline industry and tend to intensify competition. Copa competes with a…
• FY2025 20-F: …services is highly dependent on the regional economic environment in which we operate, including the GDP of the countries we serve and the disposable income of the residents of those countries. Approximately 25% of our passengers travel at least in part for business reasons, and the growth of intraregional trade…
• HTHT (H World Group Ltd)
• FY2025 20-F: …operations may be harmed. The lodging industries in China, Europe, the Middle East, Southeast Asia and other countries and regions where we operate, are highly fragmented. As a multi-brand hotel group, we believe that we compete primarily based on location, room rates, brand recognition, quality of accommodations,…
• FY2025 20-F: …competitors of new products, acquisitions, strategic partnerships, joint ventures or capital commitments; ● addition or departure of key personnel; ● fluctuations of exchange rates between the RMB and U.S. dollar, Hong Kong dollar or other foreign currencies; ● potential litigation or administrative investigations; ●…
• BIPC (BIPC)
• FY2025 20-F: …we often have significant competitive advantages in competing for projects to expand our rate base and earn incremental revenues. Accordingly, we expect our businesses to produce stable revenue and margins over time that should increase with investment of additional capital and inflation. Nearly all of our revenues…
• FY2025 20-F: …downturn in the demand for or price of a key commodity linked to one of our group's operations may result in termination, suspension or default under a key contract, or otherwise have a material adverse impact on the financial performance or growth prospects of that particular operation, notwithstanding our group's…
• TKC (TKC)
• (no filing in the citation store)
• RUN (Sunrun Inc)
• FY2025 10-K: . Performance guarantees provide a credit to the customer if the system's cumulative production, as measured on various PTO anniversary dates, is below the Company's guarantee of a specified minimum. Revenue is recognized to the extent it is probable that a significant reversal of such revenue will not occur. The…
• FY2025 10-K: …could require us to hire additional resources and increase the chance that we experience errors in the future. If we are unable to assert that our internal controls over financial reporting is effective, we could lose investor confidence in the accuracy and completeness of our financial reports, which would cause the…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.