11:14 AM EDT, 05/21/2025 (MT Newswires) -- CAE (CAE) shares appear fully valued following an operational turnaround, and with limited near-term catalysts ahead, the risk-reward now looks balanced, analysts at RBC Capital Markets said Wednesday.

While RBC views the Canadian aerospace and defense contractor as a well-managed business benefiting from long-term trends in pilot training and defense spending, it said the company trades at the highest multiple in its coverage universe, leaving little room for upside.

CAE is currently valued at about 27 times forecast 2026 earnings, with free cash flow yields that trail peers.

At the same time, fiscal 2026 guidance for both the Civil and Defense segments came in below RBC's expectations, dampening sentiment. In Civil, the company projected mid- to high-single-digit operating income growth, versus RBC's prior expectation of 12%. In Defense, the outlook for low-double-digit growth also missed the firm's 16% expectation.

CAE reported fiscal Q4 adjusted earnings of CA$0.47 per share, slightly above consensus, with revenue of CA$1.28 billion matching estimates. The brokerage called the results solid, though roughly in line after adjusting for a CA$5.5 million R&D credit benefit.

"The basis of our downgrade is on valuation and near-term macro headwinds that could weigh on growth," according to the note. The analysts noted that upside could still emerge if pilot hiring improves faster than expected or Defense segment margins outperform guidance.

RBC said the company continues to benefit from strong secular tailwinds, but those positives are already reflected in the current valuation.

The firm downgraded CAE to sector perform from outperform and cut its price target to CA$38 from CA$41.

Price: 24.90, Change: -1.01, Percent Change: -3.90