Not every growth stock down over 50% is a disaster. Some are simply misunderstood, mistimed, or out of favour for no good reason. When that happens, Foolish investors know it’s time to pay attention, especially when the company keeps executing and its long-term outlook stays strong.
That’s exactly what’s happening with one Canadian space-tech company, MDA Space (TSX: MDA). The stock has nosedived from its peak, but under the surface, the company’s business is firing on all cylinders as its revenues are surging, growth plans remain in full swing, and its technology is being recognized across the globe.
In this article, let me explain why MDA stock could be a smart long-term buy today while it’s still trading at a deep discount.
A beaten-down space-tech stock that deserves a fresh look
MDA’s stock may have dropped over 50% from its 52-week high, but its business performance tells a very different story. Headquartered in Toronto, this firm operates at the core of the global space economy by building and managing advanced technology for satellites, robotics, and geointelligence systems.
At the time of writing, its stock was trading at $23.25 per share, giving it a market cap of $2.9 billion. Over the last year, MDA stock has tanked more than 50%. But in the past three years, it’s still up by a staggering 266%. So, considering this long-term momentum, its recent drop looks more like a healthy correction in an otherwise strong upside trend.
MDA’s revenues are up, and contracts are coming in
Despite the drop in its share price, MDA’s business continues to grow at a strong pace. In the third quarter, the company posted an outstanding 45% YoY (year-over-year) jump in its revenue to $409.8 million. The bulk of this growth came from higher volumes of work in its Satellite Systems and Robotics & Space Operations segments. Notably, its Satellite Systems division alone generated $283.5 million in the latest quarter, reflecting a 69% YoY increase.
As a result, the company’s adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) surged by 49% YoY to $82.8 million, maintaining a healthy 20.2% margin. These results are not only strong but also consistent with MDA’s full-year guidance, which the company reaffirmed during its latest earnings event in November.
A strong balance sheet and a clear growth roadmap
Under the surface, MDA is doing exactly what long-term investors want to see. Its backlog at the end of the third quarter stood at $4.4 billion, giving it solid visibility into future revenues. While its cash flow for the quarter dipped to $33 million due to working capital fluctuations, the company’s balance sheet remained healthy with net debt at just 0.3 times of its trailing 12-month adjusted EBITDA.
The Canadian space-tech firm recently completed the acquisition of SatixFy Communications, which strengthens its digital satellite capabilities. On top of that, MDA achieved a big tech breakthrough by showing that its AURORA system can support fast broadband and 5G from space.
Foolish takeaway
Clearly, MDA Space is proving that a stock price doesn’t always tell the whole story. Despite being down over 50% from its 52-week high, the company’s operations are growing, its tech is gaining global attention, and its future outlook remains strong.
That’s why, for investors with patience and a long-term mindset, this might just be one of those rare chances to buy into a high-potential business while it’s still out of favour with the market.
