Not every growth stock that experiences a decline of over 50% is necessarily a failure. Many tank due to market misunderstandings or unfavorable sentiment, even when the company’s fundamentals indicate otherwise. Savvy investors are often advised to look deeper during such declines, particularly when the business continues to perform strongly and maintain a promising long-term outlook.
One Canadian company currently fitting this description is MDA Space, traded on the TSX under the ticker MDA. Despite a significant drop in stock price from its peak, recent indicators suggest that the company’s operational health is strong, with robust growth in revenue, ongoing expansion plans, and internationally recognized technology.
Currently priced at $23.25 per share, MDA boasts a market capitalization of $2.9 billion. While the stock has fallen more than 50% from its 52-week high, it has appreciated an impressive 266% over the past three years. This suggests that the recent decline may be more of a healthy correction in an otherwise positive trajectory.
During its latest earnings report, MDA reported a remarkable 45% year-over-year increase in revenue, totaling $409.8 million for the third quarter. This growth has primarily stemmed from increased activity in its Satellite Systems and Robotics & Space Operations segments, with the Satellite Systems division alone contributing $283.5 million—a staggering 69% increase from the previous year.
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The strong financial performance translates into a 49% year-over-year surge in adjusted EBITDA, reaching $82.8 million and preserving a solid margin of 20.2%. Furthermore, MDA reaffirmed its full-year guidance, indicating that its growth trajectory remains on track.
MDA’s backlog stood at an impressive $4.4 billion at the end of the third quarter, providing meaningful visibility into future revenues. While cash flow dipped to $33 million due to working capital changes, the company’s balance sheet remains strong, with a net debt equivalent to just 0.3 times its trailing 12-month adjusted EBITDA.
Additionally, MDA recently completed the acquisition of SatixFy Communications, enhancing its digital satellite capabilities. The company has also made significant strides technologically, demonstrating that its AURORA system can support high-speed broadband and 5G connections from space.
In summary, the stock price of MDA Space does not fully reflect the company’s growing operations and technological advancements. With its current stock price down over 50% from its peak, the opportunity presents itself for long-term investors seeking to invest in a promising business that is currently out of favor in the market. This scenario may well represent a rare opportunity to capitalize on MDA’s high potential for future growth.
