CAE Healthcare Unit Going From Strength To Strength

CAE, Inc. (TSE:CAE, Mkt cap 4.02B, P/E 20.17, Div/yield 0.07/1.86, EPS 0.75, Shares 267.18M) is talking up its healthcare division, despite the unit only accounting for a small proportion of its total revenue in fiscal 2015.

CAE Healthcare division double-digit growth

CAE Healthcare division is anticipating double-digit growth

As the Financial Post reports, that’s because it is anticipating double-digit growth “at a minimum” from this area of its business over the next few years.

That optimism doesn’t appear to be misguided either, with revenue for the healthcare division increasing by 35% in the fourth quarter to $29.3 million while operating profit rose nearly six-fold to $4.1 million.

Whilst that still only means that the unit accounts for $94.3 million – or just over 4% – of its total revenue for last year, the Montreal-based firm believes the potential for the division is considerable.

Marc Parent, the company’s CEO, explained: “What’s really going to throw the cover off the ball of this business is if and when — and to me it’s when — we get the adoption of regulation that mandates the use of simulation for initial and recurrent training like it does for pilots.”

He added that need for such regulation is necessitated by the number of people who die every year from healthcare errors, stating that it is “equivalent to a jumbo jet crashing every single day with all fatalities on board.”

Parent concluded by saying: “Would you fly if that happened on airplanes? Nobody would, but that outcry doesn’t happen in healthcare.”

CAE this week reported fiscal fourth-quarter profit of $51.7 million – equating to 19 cents per share, according to the company, meaning it narrowly missed Wall Street expectations.

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