If Canadian Defence Spending Accelerates, These 3 Stocks Won’t Stay Overlooked

Canada’s rising defence spending could benefit more than traditional weapons makers, including space tech, specialized aircraft, and military training services.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published August 24, 8:15 pm EDT

| More on: BBD.BCGYMDA

Key Points

Canada is ramping defence and security budgets, but procurement is slow and contract economics can still disappoint.
MDA Space is growing fast with a $4 billion backlog, though free cash flow is negative and the stock looks expensive.
Bombardier and Calian offer defence-adjacent exposure through modified aircraft, training, and support, but execution risk remains.

Canada’s defence buildout won’t stop at fighter jets and submarines. Modern militaries also need satellites, surveillance aircraft, secure communications, training systems, healthcare, and years of technical support. That broader shopping list could create opportunities among Canadian stocks that investors don’t immediately label defence contractors.

The numbers are getting difficult to ignore. Canada says defence spending exceeded $63 billion in fiscal 2025 to 2026, reaching 2% of gross domestic product (GDP) after sitting at 1.5% a year earlier. The country has also committed to NATO’s 5% target by 2035, divided between core military spending and defence-related infrastructure.

That doesn’t mean every announcement will become corporate revenue. Procurement can move painfully slowly, governments can change priorities, and fixed-price contracts can turn expensive when costs jump. The better candidates already possess specialized technology, established military relationships, and enough backlog to make future demand more than a nice presentation slide.

A child pretends to blast off into space. — Source: Getty Images

MDA

MDA Space (TSX:MDA) builds satellites, robotics, and geointelligence systems. Its equipment can support secure communications, missile warning, Arctic surveillance, and space-domain awareness – capabilities that are becoming central to national defence.

MDA stock recently secured a $688 million Canadian satellite contract and was selected for defence programs involving the United States and Japan. Second-quarter revenue climbed 34% to $499 million, while backlog rose $310 million from the previous quarter to $4 billion.

Investors still need restraint. MDA stock recently traded above $47, while the company produced negative free cash flow of $150 million during the quarter as working capital and capital expenditures climbed. MDA stock’s growth is impressive, but its valuation already assumes plenty of successful execution.

BBD

Bombardier (TSX:BBD.B) is best known for business jets, yet its Global and Challenger aircraft can be modified for surveillance, communications, intelligence, and government transport missions. That allows militaries to acquire specialized aircraft without funding an entirely new platform.

Second-quarter revenue increased 6% to US$2.2 billion, services revenue rose 14%, and backlog reached US$21.8 billion. Free cash flow also improved to US$228 million from a US$164 million outflow one year earlier. Defence orders could deepen that backlog while creating long-term service revenue.

The catch is price and execution. At roughly 21 times expected 2026 earnings, Bombardier stock isn’t undiscovered, while supplier delays still reduced quarterly aircraft deliveries. Its balance sheet has improved considerably, although continued debt reduction remains important.

CGY

Calian Group (TSX:CGY) may be the least familiar name of the three. It provides military training, healthcare, cyber solutions, engineering, and satellite communications. That’s exactly the less glamorous services required to turn new equipment and recruits into operational capability.

Calian stock signed more than $200 million in Canadian defence contracts during its second quarter. Revenue rose 18% to a record $229 million, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) jumped 60%, and more than $1 billion of its $1.5 billion backlog came from defence work. Near $81 in late July, the shares traded at approximately 18 times forward earnings.

Its smaller size creates meaningful upside if contract wins accelerate, but also greater volatility. Government delays, acquisition integration, or weaker results in its non-defence operations could quickly interrupt the story.

Bottom line

MDA stock offers advanced space technology, Bombardier stock supplies adaptable aircraft, and Calian stock handles the training and support that keep military capabilities functioning. None is a risk-free shortcut to Canada’s defence budget. A patient long-term investing approach and sensible entry price remain essential, even when Ottawa is preparing to write much larger cheques.