$1,000 Invested in Bombardier Stock 5 Years Back Would Be Worth This Much Today!

Bombardier stock has surged 500% since mid-2020 easily crushing the broader market returns. But is BBD stock a buy or a sell now?

| More on:
Dice engraved with the words buy and sell

Image source: Getty Images.

One of the most popular stocks on the TSX is Bombardier (TSX:BBD.B), a company that operates in the aerospace manufacturing space. Valued at a market cap of $6 billion, Bombardier stock has gained close to 60% in the last 12 months, crushing the TSX index by a wide margin. In fact, since July 2020, BBD stock has surged by a monstrous 500%.

But while Bombardier stock has delivered staggering returns in the last two and a half years, it has underperformed the TSX if you widen the horizon. For example, in the last five years, BBD stock is down 30% and has declined by 38% since February 2013.

So, a $1,000 investment in BBD stock five years back would be worth $688 today. Comparatively, a similar investment in the TSX would be worth close to $1,600.

Investing in the stock market is a tricky proposition, especially if you are buying shares of individual companies. It’s imperative to analyze the quantitative and qualitative factors surrounding the company, which may require a ton of expertise. Further, most of the stocks, including Bombardier, struggle to outpace the broader market over time, thereby burning investor wealth.

Keeping this in mind, let’s see if Bombardier can continue to move higher in 2023 and beyond.

Is BBD stock a buy or a sell?

Bombardier has a fleet of 5,000 aircraft in service with corporates, charters, governments, and high net-worth individuals. Three years back, the company was grappling with falling sales and negative profit margins. Its revenue fell from US$15.8 billion in 2019 to US$6 billion in 2021. Its weak financials also led credit rating agencies to lower their outlook on Bombardier.

In 2020, Bombardier exited several businesses to focus on its business jet vertical. This pivot allowed the company to shore up its balance sheet by lowering debt to US$6.4 billion in 2022, down from over US$10 billion in mid-2020.

After a decline in sales between 2020 and 2021, Bombardier reported a 14% increase in revenue in 2022. Analysts tracking the stock expect sales to rise by 12.1% to $10.5 billion in 2023 and by 4% to $10.9 billion in 2024. Comparatively, its adjusted earnings are forecast to expand to $5 per share in 2024 from $1 per share in 2022.

So, BBD stock is priced at 0.65 times forward sales and 25 times forward earnings, which is not too expensive considering its growth estimates. Analysts, in fact, expect earnings to grow by 173% annually in the next five years.

Bombardier ended 2022 with an order backlog of US$14.8 billion, providing investors with enough revenue visibility. It also delivered 123 aircraft in 2022 as lockdown rules were relaxed globally.

Bombardier is deleveraging its balance sheet

Bombardier is expanding its global services network to capture a greater share of the market where it operates, providing shareholders with regional diversification. The company also aims to deleverage its balance sheet significantly by 2025 and is targeting a net-debt-to-EBITDA ratio of 3 times while reducing annual interest expense by US$250 million.

Since December 2020, it has reduced long-term debt by US$4 billion, taking its gross debt to US$6 billion in 2022.

Bombardier is a company that has turned around its business quite remarkably. BDB.B stock is currently trading at a discount of 10% compared to consensus price target estimates.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Investing

Hand arranging wood block stacking as step stair with arrow up.
Tech Stocks

3 Canadian Growth Stocks I’d Buy Under $30

These under $30 Canadian growth stocks are well-positioned to capitalize on mega trends such as e-commerce, the electrification of vehicles,…

Read more »

Gas pipelines
Stocks for Beginners

3 Reasons to Buy Enbridge Stock Like There’s No Tomorrow

Enbridge (TSX:ENB) is a superb long-term option. Here's why you should buy Enbridge stock right now and hold it for…

Read more »

money cash dividends
Dividend Stocks

This 8.39% Dividend Stock Can Pay $100 Cash Every Month

Consider investing in this monthly dividend stock at current levels to lock in high-yielding monthly distributions to create a good…

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Tech Stocks

Why This Tech Stock Just Jumped 18%

This tech stock just saw shares surge after announcing it was being acquired, but more growth could still be in…

Read more »

Canadian flag
Investing

3 Top-Performing Canadian Stocks That Should Just Keep Winning

Given their healthy growth prospects and solid underlying businesses, the uptrend in these three top-performing Canadian stocks could continue.

Read more »

The sun sets behind a power source
Investing

3 Reasons to Buy Fortis Stock Like There’s No Tomorrow

As far as top dividend stocks are concerned, Fortis (TSX:FTS) remains a top option long-term investors should consider right now.

Read more »

growing plant shoots on stacked coins
Stocks for Beginners

1 Copper Stock to Buy as Copper Prices Shine

The price of copper continues to climb, and more copper production is on the way for this top stock up…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

Here’s the Average TFSA Balance in 2024

The Bank of Montreal (TSX:BMO) says that the average TFSA balance is $41,510, far below the maximum.

Read more »