Paying more than 30 times forward earnings for a stock sounds like the sort of thing my value-investing uncle would mention before passing the potatoes.
Usually, he’d have a point. Expensive stocks can fall awfully quickly when growth disappoints. Yet valuation becomes more interesting when the company underneath that multiple is still expanding quickly enough for earnings to catch up. One Canadian space stock offers just that.
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MDA
MDA Space (TSX: MDA) operates across satellite systems, space robotics, and geointelligence. Canadians may know the company best for Canadarm, but today’s MDA stock is building satellites, radar systems, communications technology, and robotics for commercial and government customers around the world.
Second-quarter revenue surged 34% year over year to $498.6 million, driven by higher activity across all three business areas. Meanwhile, MDA finished June with roughly $4 billion of backlog. That backlog is especially useful for investors considering buying stocks in Canada. It represents contracted work that can gradually become future revenue rather than growth management merely hopes will arrive.
MDA stock also nudged up the midpoint of its 2026 outlook, now expecting $1.8 billion to $1.9 billion of revenue, and isn’t simply benefiting from more satellites being launched. Governments increasingly view space infrastructure as part of national defence. Secure communications, missile warning, Earth observation, and Arctic monitoring all require satellites and the technology inside them.
More to come
In August, Telesat expanded its Lightspeed low-Earth-orbit constellation, handing MDA stock another $474 million of work. The expanded satellites will include military communications capacity alongside commercial broadband technology. MDA stock also won recent work tied to Canadian, American, and Japanese defence programs.
Then there’s expansion through acquisitions. MDA stock agreed to acquire U.S.-based Blue Canyon Technologies for approximately US$620 million, adding satellite technology, American defence exposure, and an estimated US$3.5 billion opportunity pipeline.
It also proposed buying a majority stake in CLS, a French provider of AI-driven Earth-observation analytics. Put those pieces together and MDA is gradually moving from being a Canadian space hardware company toward something much larger and more global.
Looking ahead
MDA stock returned to public markets at $14 per share in April 2021. At a recent price around $49.71, the shares have produced an approximate 26.7% compound annual growth rate since the IPO. If that same rate somehow continued, here’s what the share price could look like with a $7,000 investment.
| PERIOD | SHARE PRICE | NUMBER OF SHARES | TOTAL INVESTMENT | PROJECTED POSITION VALUE | PROJECTED GAIN |
|---|---|---|---|---|---|
| Today | $49.71 | 140 | $6,959.40 | $6,959.40 | — |
| 1 year | $62.99 | 140 | $6,959.40 | $8,818.60 | $1,859.20 |
That’s an illustration, certainly not a forecast. A 26.7% annual return becomes considerably harder to maintain as a company gets larger, and growth stocks have an irritating habit of making smooth spreadsheets look silly.
Still, the exercise demonstrates why a stock doesn’t need to look cheap today to produce strong returns later. Earnings and revenue can eventually grow into an initially uncomfortable valuation.
Consider this
At roughly 32 times forward earnings, MDA stock isn’t cheap. Free cash flow is also expected to be neutral to negative this year as the company spends heavily on manufacturing capacity and technology. Adding Blue Canyon and potentially CLS creates integration risk, while large government and satellite contracts can be delayed.
MDA stock has already shown investors what happens when enthusiasm gets ahead of itself. The stock’s 52-week high sits near $68, considerably above its recent price. That volatility is why I’d build a position gradually and keep some cash available to add during a stock market correction.
Still, I wouldn’t wait for MDA stock to look traditionally cheap before buying anything. Revenue is climbing, billions of dollars of contracted work remain in the pipeline, and defence spending is opening an entirely new growth channel.
Bottom line
So sure, it’s not cheap. Yet if MDA stock keeps converting its enormous backlog and expanding defence opportunity into earnings, today’s valuation could look considerably less space-aged a few years from now.
