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While CAE Inc. (TSE:CAE) might not have the largest market cap around , it saw significant share price movement during recent months on the TSX, rising to highs of CA$37.99 and falling to the lows of CA$30.01. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether CAE's current trading price of CA$32.73 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at CAE’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's The Opportunity In CAE?
Great news for investors – CAE is still trading at a fairly cheap price. Our valuation model shows that the intrinsic value for the stock is CA$50.28, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that CAE’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Check out our latest analysis for CAE
What does the future of CAE look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With revenues expected to grow by a double-digit 22% over the next couple of years, the outlook is positive for CAE. If the level of expenses is able to be maintained, it looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? Since CAE is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.