Folks, with geopolitical tensions flaring up across the globe, looking at defense stocks seems like a good idea. Indeed, this year isn’t much more than two months old, and we have already seen a U.S. invasion of Venezuela followed by recent strikes in Iran. That’s on top of existing wars in Ukraine, the Middle East, Africa, and beyond.
So, as nations are ramping up defence budgets like never before, Canadian and U.S. investors have a prime opportunity to position portfolios in resilient high-growth defence plays backed by ironclad fundamentals.
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MDA Space
A top Canadian satellite system provider, MDA Space (TSX: MDA) is a top pick of mine for those looking to own a piece of the company that put forward the Canadarm3 program, as well as geospatial intel critical for modern defence operations.
The company’s revenue skyrocketed 33.7% to more than $1 billion last year. This top-line surge led MDA’s net income to soar more than 60%, with a growing backlog conversion in satellite and robotics segments bolstering the outlook for more growth down the line. Indeed, MDA’s management now guides for 48% revenue growth to $1.57–1.63 billion in fiscal 2025, with adjusted EBITDA margins expected to remain steady at around 20%.
To me, this is mostly a backlog story. MDA’s massive $4.4 billion backlog grew more than 40% year-over-year, and provides multi-year visibility tied to surging defence spends. Finally, the company’s free cash flow hit $148 million last year, supporting continuing debt reduction efforts. With a rather inexpensive forward price-earnings multiple around 25 times, and plenty of long-term growth potential given the need for space-based defence capabilities, this is a stock to own over the long term, in my view.
Calian Group
This is my first time covering Calian Group (TSX: CGY), but it’s a company I think is worth considering for those seeking to gain exposure to the cybersecurity and satcom segments of the Canadian defence industry.
As Ottawa pledges more capital to its defence sector, this is a company I think could garner significant upside over the long term. Indeed, the company’s recent Q1 fiscal 2026 results highlighted strength across the board. Calian’s revenue climbed 12% to $208 million (6% organic growth), with gross margins expanding to 34.1% and adjusted EBITDA surging 28% to $23 million at an 11% margin.
Importantly, these solid top-line and margin numbers led Calian’s adjusted net profit to jump 40% to $11.8 million, with EPS up 46% to $1.03, alongside strong $16 million operating free cash flow (69% conversion). Despite these solid numbers (and a dividend yield of 1.4%), CGY stock still trades at a favourable forward price-earnings ratio of just 19 times. That’s cheap enough to entice a plethora of investors to this name, something I think will continue to take place through the remainder of this year.
CAE Inc.
Finally, we come to CAE Inc (TSX: CAE), a simulation training company providing vital services for air forces modernizing amid endless conflicts worldwide.
The company’s revenue in its most recent quarter came in at $1.25 billion (up 2% YoY). That’s not incredible growth by any means. However, CAE’s Defense unit shone with 14% revenue growth to $535 million and adjusted operating income up 38% to $54 million (10.1% margin). Notably, that’s the first time this metric has come in at the double-digit range in years.
Equally important as a long-term growth driver, orders hit $571 million for a 1.1 times book-to-bill. This metric bolsters an $11 billion backlog amid geopolitical demand spikes. With robust free cash flow of $112 million this past quarter and deleveraging ahead of schedule, I think CAE is a fundamentally-sound powerhouse poised for margin expansion over time.
