Spending time in the market can generate wealth if invested in the right stocks. But how to find stocks that can thrive in the long term? Investing in stocks is investing in a business, and businesses have ups and downs. If you put yourself in the business owner’s shoes and see the economic, political, regulatory, and industrial environment and the management’s approach, you can get a fair idea of which business will be the wealth generator.
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Finding value in Canadian stocks
A business is as good as its management. If they are distorted from reality, then it is a stock to steer clear of. However, management that accepts the headwinds, cuts outlook if needed, and makes difficult choices to sustain in crisis could provide value in the long term.
One such example is Bombardier (TSX:BBD.B). Its management made some difficult choices of downsizing from several businesses of passenger planes and trains to just business jets. Four years of focused efforts in business jets and aftermarket services pulled the company from a turnaround stock to a growth stock, and if things go as planned, even a dividend stock in the future.
Before the first-quarter earnings, Bombardier CEO Eric Martel expressed concerns about tariff wars affecting jet deliveries and refused to give guidance until there was clarity. Once the United States imposed tariffs on Canada in March and Bombardier’s products were exempted from tariffs, the company gave strong guidance.
Is Bombardier a value stock to hold for the long term?
In its 2025 guidance, Bombardier’s focus is on improving profitability. It expects revenue to grow by 6.7% and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by 14%. It also expects its free cash flow to more than double to US$500 million in the lower range of its guidance.
| Particulars | 2024 Results (US$) | 2025 Guidance (US$) |
| Aircraft deliveries (in units) | 146 | >150 |
| Revenues | $8.67 billion | >$9.25 billion |
| Adjusted EBITDA | $1.36 billion | >$1.55 billion |
| Free cash flow | $232 million | $500 million – $800 million |
The business jet maker looks to derive value from its business jets by modifying them for defence and selling pre-owned aircraft. It has already monetized the maintenance and aftermarket service of its business jets in the air and will look for targeted acquisitions to expand this business.
The management’s strong execution of its plans makes it a value stock even at a $100 share price if you hold it for the long term. The last five-year turnaround drove the stock price up 700%. The next five years could give strong double-digit growth and even marginal dividends.
Should you consider holding Descartes Systems stock for the long term?
Descartes Systems (TSX::DSG) share price fell by 13% after the company released its first-quarter earnings. While the company reported strong double-digit revenue and adjusted EBITDA growth of 12% year over year, it gave a word of caution by announcing cost-reduction initiatives.
Why would a company with a 45% adjusted EBITDA margin and a net cash position of $176.4 million (equivalent to its quarterly revenue) reduce costs?
Descartes earns 67% of its revenue from the United States. Many of its customers are facing economic and global trade uncertainty, hinting at a slowdown or decline in revenue in the coming months as tariffs reduce trade activity. The company is slashing its workforce by 7% and expects operating cash flow to reduce in the second quarter as it undertakes restructuring.
Descartes is taking these steps to preserve its profit margins. However, it is well positioned to tap the recovery in trade activity once the tariff war eases. Even if the tariffs bring structural changes in the supply chain, Descartes’s solutions can help companies adapt to the change. The June dip has made Descartes a value stock to buy, and its secular growth has made it a stock to hold for the long term.
