The equity markets are pulling back in April 2025 due to trade war escalations and the possibility of a global recession. However, it also allows shareholders to gain exposure to quality stocks trading at a discount.
In this article, I have identified two Canadian aerospace stocks you can buy right now and benefit from outsized gains over time.
Is the Canadian aerospace stock undervalued?
Valued at a market cap of $7.4 billion, Bombardier (TSX:BBD.B) is engaged in the manufacture and sale of business aircraft. It provides new aircraft, specialized aircraft solutions, and pre-owned aircraft. It also offers aftermarket services, including parts, smart devices, service centers, training, and technical publications.
Bombardier suspended its 2025 financial guidance, citing uncertainty around potential tariffs on Canadian imports, after reporting solid fourth-quarter (Q4) results that beat analyst expectations.
“I am very disappointed that we can’t guide 2025 today,” Chief Executive Officer Éric Martel told investors on the company’s earnings call. “The team and I were well prepared to confirm our 2025 objectives, but in light of the current tariff threat, not providing guidance is the most responsible and transparent thing for us to do.”
The business jet maker delivered strong 2024 results, with revenue reaching $8.7 billion, exceeding its midpoint guidance of $8.4 billion. Adjusted EBITDA (earnings before interest, tax, depreciation, amortization) totalled $1.36 billion with margins of 15.7%, while free cash flow hit $232 million.
Bombardier’s services division surpassed $2 billion in revenue a year ahead of schedule, representing 16% growth compared to 2023. This segment now accounts for about half of the company’s market share.
Despite tariff concerns, Martel noted that Q1 order activity remains robust, with current sales primarily for aircraft that would be delivered after the 2026 U.S. midterm elections. Bombardier maintained a book-to-bill ratio of one for 2024, with backlog increasing to $14.4 billion.
“The vast majority of our platforms are made up of more U.S. parts and systems than any other country,” Martel emphasized, noting it has 2,800 U.S.-based suppliers across 47 states.
Chief Financial Officer Bart Demosky highlighted Bombardier’s financial progress, with the net leverage ratio dropping to 2.9 times, achieving its 2025 target a year early. It reduced its total debt by $400 million over the past year, including a $300 million repayment in January.
Analysts expect Bombardier’s free cash flow to improve from $230 million in 2024 to $1.28 billion in 2029. If the stock is priced at 15 times forward free cash flow, it should surge over 150% in the next three years.
Is this TSX stock a good buy right now?
Another cheap TSX stock is Air Canada (TSX:AC), which currently trades 75% below all-time highs. Like other aerospace stocks, Air Canada was decimated during the COVID-19 pandemic and was forced to increase its balance sheet debt to sustain its cash-burn rates.
A challenging macro environment will likely negatively impact Air Canada’s free cash flow generation. For instance, Bay Street expects Air Canada to report a free cash outflow over the next two years. However, its FCF is projected to improve to $2.66 billion in 2029, up from $1.29 billion in 2024.
If Air Canada stock maintains its current multiple, it should gain over 100% in the next four years. Analysts remain bullish on the TSX stock and expect it to surge 85% in the next 12 months.
