Bombardier (TSX:BBD.B) has been one of the most-watched stocks in the Canadian stock market in recent years. However, its share price has seen a nearly 20% correction in the second quarter of 2023 after delivering outstanding 282% positive returns in the previous three quarters combined.
So, is it a good time for long-term investors to buy Bombardier stock on the dip in June? Let’s find out.
Bombardier stock: Key fundamental factors
In the last seven to eight years, Bombardier has made some significant changes to its business strategy to improve fundamentals by focusing on its jet manufacturing business. In order to achieve this goal, the Canadian aerospace manufacturer implemented a new strategic restructuring plan. Despite facing COVID-19-related challenges in between, it continued to focus on its strategic priorities to remain on track, which helped it improve its balance sheet, financial performance, and operational efficiency.
To give you an idea, Bombardier’s total sales figures rose 13.6% YoY (year over year) in 2022 to US$6.9 billion with the help of higher deliveries, improved aircraft mix, and stronger aftermarket revenues. More importantly, its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) for the year jumped 45% YoY to US$930 million, supported by cost efficiencies and higher contribution of the Global 7500 aircraft. With this, its adjusted EBITDA margin also expanded significantly to 13.5% in 2022 from 10.5% in the previous year.
Could this strong growth trend continue in 2023?
In the first quarter this year, a favourable delivery mix and continued strength in its aftermarket sales drove Bombardier’s total revenue up by about 17% YoY to US$1.5 billion. Similarly, the company’s adjusted quarterly EBITDA climbed 27% from a year ago to US$212 million with an improved margin of 14.6%. During the quarter, it also made a repayment of about US$400 million of debt from cash in the balance sheet.
As Bombardier continues to ramp up production with an aim to deliver more than 138 aircraft in 2023, its financial growth trends are likely to reflect further improvements.
Earlier this year, Bombardier’s continued progress on its long-term plan encouraged the management to raise the bar by increasing its 2025 strategy objectives. With this, the company has raised its 2025 revenue objective from about US$7.5 billion to more than US$9 billion. In addition, it now targets to achieve an adjusted EBITDA of US$1.625 billion in 2025 — stronger than its previous objective of US$1.5 billion.
Is Bombardier stock worth buying on the dip now?
Clearly, in the last few years, the Canadian business jet maker has shown phenomenal progress towards its long-term strategic objectives by reducing debt levels and delivering outstanding financial performance. This is one of the key reasons why Bombardier stock rallied by 336% in 2021 in 2022 combined.
While Bombardier stock has gained 13.5% value in 2023 so far to currently trade at $59.32 per share with a $5.9 billion market cap, a 19.6% quarter-to-date decline in its share prices make it look undervalued to buy for the long term, especially given its rapidly improving financial position and long-term fundamentals.