Financial Review: Embraer-Empresa Brasileira de Aeronautica (NYSE:EMBJ) vs. CAE (NYSE:CAE)

CAE (NYSE:CAE) and Embraer-Empresa Brasileira de Aeronautica (NYSE:EMBJ) are both industrials companies, but which is the superior investment? We will contrast the two companies based on the strength of their risk, analyst recommendations, valuation, earnings, institutional ownership, profitability and dividends.

Analyst Ratings

This is a breakdown of recent ratings and target prices for CAE and Embraer-Empresa Brasileira de Aeronautica, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
CAE	1	4	5	0	2.40
Embraer-Empresa Brasileira de Aeronautica	0	2	4	0	2.67

CAE currently has a consensus target price of $31.00, suggesting a potential upside of 27.00%. Embraer-Empresa Brasileira de Aeronautica has a consensus target price of $80.00, suggesting a potential upside of 8.61%. Given CAE’s higher probable upside, research analysts clearly believe CAE is more favorable than Embraer-Empresa Brasileira de Aeronautica.

Valuation & Earnings

This table compares CAE and Embraer-Empresa Brasileira de Aeronautica”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
CAE	$4.99 billion	1.57	$226.62 million	$0.65	37.55
Embraer-Empresa Brasileira de Aeronautica	$7.58 billion	1.76	$351.90 million	$2.47	29.82

Embraer-Empresa Brasileira de Aeronautica has higher revenue and earnings than CAE. Embraer-Empresa Brasileira de Aeronautica is trading at a lower price-to-earnings ratio than CAE, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

67.4% of CAE shares are held by institutional investors. Comparatively, 34.6% of Embraer-Empresa Brasileira de Aeronautica shares are held by institutional investors. 18.3% of CAE shares are held by company insiders. Comparatively, 1.0% of Embraer-Empresa Brasileira de Aeronautica shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Profitability

This table compares CAE and Embraer-Empresa Brasileira de Aeronautica’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
CAE	6.36%	7.45%	3.51%
Embraer-Empresa Brasileira de Aeronautica	5.35%	11.90%	3.51%

Risk & Volatility

CAE has a beta of 1.01, meaning that its share price is 1% more volatile than the S&P 500. Comparatively, Embraer-Empresa Brasileira de Aeronautica has a beta of 1.4, meaning that its share price is 40% more volatile than the S&P 500.

Dividends

CAE pays an annual dividend of $0.33 per share and has a dividend yield of 1.3%. Embraer-Empresa Brasileira de Aeronautica pays an annual dividend of $0.47 per share and has a dividend yield of 0.6%. CAE pays out 50.6% of its earnings in the form of a dividend. Embraer-Empresa Brasileira de Aeronautica pays out 19.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Summary

Embraer-Empresa Brasileira de Aeronautica beats CAE on 8 of the 15 factors compared between the two stocks.

About CAE

CAE Inc., together with its subsidiaries, provides simulation training and critical operations support solutions in Canada, the United States, the United Kingdom, Europe, Asia, the Oceania, Africa, and Rest of the Americas. It operates through two segments, Civil Aviation; and Defense and Security. The Civil Aviation segment offers training solutions for flight, cabin, maintenance, and ground personnel in commercial, business, and helicopter aviation; a range of flight simulation training devices; and ab initio pilot training and crew sourcing services, as well as aircraft flight operations solutions. The Defense and Security segment operates as a training and simulation provider that delivers platform-independent solutions to enable and enhance force readiness and security for defense forces, original equipment manufacturers (OEMs), government agencies, and public safety organizations. The company was formerly known as CAE Industries Ltd. and changed its name to CAE Inc. in 1993. CAE Inc. was incorporated in 1947 and is headquartered in Saint-Laurent, Canada.

About Embraer-Empresa Brasileira de Aeronautica

Embraer S.A. designs, develops, manufactures, and sells aircraft and systems in North America, Latin America, the Asia Pacific, Brazil, Europe, and internationally. The company operates through Commercial Aviation; Defense & Security; Executive Aviation; Services & Support; and Other segments. The Commercial Aviation segment designs, develops, manufactures, and sells commercial jets, as well as leases aircraft. The Defense & Security segment engages in the research, development, production, modification, and support for military defense and security aircraft; and offers a range of products and integrated solutions that include radars, special space systems, and cyber security solutions, as well as information and communications systems comprising command, control, communications, computer, intelligence, surveillance, and reconnaissance systems. The Executive Aviation segment develops, produces, and sells executive jets. This segment also leases Phenom family executive jets in the entry jet and light jet categories; and Praetor 500 and Praetor 600, disruptive executive jets in the midsize and super midsize categories. The Service & Support segment provides after-service solutions and support services; maintenance, repair, and overhaul services for commercial, executive, and defense aircraft; and aircraft components and engines. This segment also supplies steel and composite aviation structures to various aircraft manufacturers. The Other segment engages in the supply of fuel systems, structural parts, and mechanical and hydraulic systems; and production of agricultural crop-spraying aircraft. The company was formerly known as Embraer-Empresa Brasileira de Aeronáutica S.A. and changed its name to Embraer S.A. in November 2010. Embraer S.A. was incorporated in 1969 and is headquartered in São Paulo, Brazil.