First Avenue Investment Counsel Chief Investment Officer Brian Madden told BNN Bloomberg’s Market Call on Oct. 24 that he remains positive on MDA
First Avenue Investment Counsel Chief Investment Officer Brian Madden told BNN Bloomberg’s Market Call on Oct. 24 that he remains positive on MDA Space (MDA Space Stock Quote, Chart, News, Analysts, Financials TSX:MDA), despite the recent setback tied to its loss of the EchoStar contract.
Madden said his firm used the pullback as a buying opportunity.
“In fact, we bought it on that dip when they lost the EchoStar contract,” he said. “We’ve been scoping this one since May, saw the company at a conference in the spring. Some great work was actually done on this name by our summer intern, Michael Cermatiero, overseen by my colleagues and me. And so we’ve been looking at it, but it was just running really hot, and we were being disciplined about valuation. And so we got the opportunity we were looking for to buy it on that pullback.”
MDA relisted publicly only a few years ago following private-equity ownership, but Madden noted the company’s legacy is considerably longer.
“The chart probably only goes back three or four years because it relaunched after everything was bought by private equity on the public markets around that time; it’s actually been operating for about 55 years,” he said. “It’s a leading Canadian space technology company. They manufacture low-earth orbit satellites. And so it’s well positioned to capitalize on the one-and-a-half trillion dollar global space economy.”
He said the opportunity spans both commercial and defence markets.
“And there are really two aspects to that,” he said. “So there’s the telecommunications and mobility market, and then there’s the defence opportunity. Both are growing. Defence may get through an outsized boost with more federal funding when we see the federal budget.”
Madden pointed to a fast-growing order book as a key reason for his conviction.
“The order backlog is just under five. The order book has compounded at 54% annually since 2020. Management itself foresees 25% to 30% revenue growth over the next few years. And that’s driven by conversion of their $20-billion plus dollar pipeline that’s been cultivated carefully through contacts in government and private sector over many years.”
He added that valuation remains reasonable given the growth profile.
“Although the stock has run up rather nicely this year, we think it trades at a fairly undemanding multiple of about 12 times enterprise value to EBITDA, which we think is pretty reasonable given the very rapid pace of growth we foresee in the coming years.”
MDA shares have risen 67.08% over the past 12 months and 151.5% over five years. Of the analysts covering the stock, seven rate it “Buy,” one “Hold” and zero “Sell,” with a consensus price target of $43.56.
The shares closed Oct. 28 at $34.17.
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