With its outstanding 156.3% gains in 2024, MDA Space (TSX:MDA) emerged as one of the top three performers in the TSX Composite Index last year. The Toronto-based space firm is continuing to consistently impress investors with its innovative technology solutions and expanding presence in the global space race. From advanced satellite systems to robotic technology and surging demand for space infrastructure, MDA has benefited from the booming industry in recent years.
But can MDA continue to deliver big returns over the next five years? In this article, I’ll break down what’s driving MDA’s growth fundamentals and explore its future prospects. This might help you decide whether this stock, which is already a part of my portfolio, deserves a spot in your portfolio.
Source: Getty Images
MDA stock’s improving financial growth trends
One of the key factors that has helped MDA Space gain investors’ confidence in recent years is its consistently improving financial growth trends. In 12 months ended in September 2024, the Canadian space tech company’s total revenue rose 19% YoY (year over year) to $938.5 million with the help of consistently growing demand for its services across the globe.
More importantly, the company’s adjusted earnings during the same period jumped by 50.3% YoY to $0.57 per share, reflecting its consistent focus on profitability as it scales its operations. Similarly, its adjusted net profit margin in the last four quarters combined expanded to 7.2% from 5.6% in the previous four quarters.
In the third quarter of 2024, several factors, including higher work volumes across all business areas, accelerated MDA’s YoY sale growth rate to 38%. At the same time, its adjusted net profit margin for the quarter jumped to 10.4%. These remarkable improvements in its financials justify why MDA stock has seen a strong rally of late.
Could this growth continue over the next five years?
MDA’s recent operational milestones, such as progress on the Canadarm3 program and the CHORUS Earth Observation constellation, showcase its ability to execute technologically advanced projects. As a result of surging demand, the company’s backlog jumped by 49% YoY to a solid $4.6 billion at the end of the third quarter. This robust backlog not only provides revenue visibility but also strengthens MDA’s position as a top stock in the fast-growing space industry.
In simple words, MDA’s key long-term growth drivers include increasing global demand for space infrastructure, satellite systems, and geo-intelligence solutions. Its strategic investments in advanced manufacturing facilities and a skilled workforce are expected to boost its production capacity and operational efficiency, which aligns with the escalating needs of its clients like Telesat and various international agencies. Moreover, MDA’s focus on innovation, like its AURORA satellite platform, could help it capture market share in emerging technologies and services.
Foolish bottom line
Currently trading at $27.57 per share with a market cap of $3.4 billion, MDA stock’s valuation reflects its recent success and growth potential. In my opinion, early 2025 presents a promising entry point, with MDA stock expected to benefit from favourable market conditions for growth stocks, increasing adoption of space technologies, and its proven execution capabilities. Holding this stock over the next five years could yield solid returns as the company continues to scale its operations and capitalize on a booming space tech sector.
