NEW YORK (
) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and growth in earnings per share. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall.
Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 2.6%. Since the same quarter one year prior, revenues rose by 16.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 37.70% is the gross profit margin for CAE INC which we consider to be strong. It has increased significantly from the same period last year. Along with this, the net profit margin of 10.10% is above that of the industry average.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Aerospace & Defense industry and the overall market on the basis of return on equity, CAE INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- After a year of stock price fluctuations, the net result is that CAE's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- Net operating cash flow has significantly decreased to -$87.80 million or 98.19% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
CAE Inc., together with its subsidiaries, designs, manufactures, and supplies simulation equipment and services, and develops integrated training solutions to the military, commercial airlines, business aircraft operators, and aircraft manufacturers worldwide. The company has a P/E ratio of 14.1, below the average aerospace/defense industry P/E ratio of 14.5 and below the S&P 500 P/E ratio of 17.7. CAE has a market cap of $2.6 billion and is part of the
industry. Shares are down 12.2% year to date as of the close of trading on Monday.
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