Canada’s national defence priorities have undergone a seismic shift. Money is flowing into military hardware at a pace not seen in decades as Ottawa accelerates spending toward NORAD modernization, Arctic sovereignty, and long-term NATO commitments. While mega-cap defence contractors often grab headlines during government spending pushes, the most lucrative opportunities for Canadian defence stock investors often sit deeper in the industry’s supply chain. That’s where small-cap specialists with high barriers to entry are quietly generating outsized shareholder returns.
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Canada’s defence push unlocks rapid domestic growth
My favourite way to play this secular spending trend is Firan Technology Group (TSX: FTG). When I highlighted FTG as a momentum play on September 2, the core thesis rested on its specialized niche as a component supplier embedded in major allied defence programs, with minimal trade war risks exposure – and its latest third-quarter earnings results show that thesis unfolding in real-time. And FTG stock gained momentum.
Third-quarter revenue surged by 34.3% to a record $64.1 million, FTG’s order backlog increased by 49% year over year, net income was up 38.9% as operating leverage kicked in, and year-to-date free cash flow has doubled to $14.6 million.
FTG manufactures high-reliability printed circuit boards, illuminated cockpit panels, and complex electronic assemblies for military platforms globally. Far from being a passive beneficiary of defence tailwinds, FTG is directly embedded in major Canadian and allied defence programs, including manufacturing advanced circuit boards for the global F-35 stealth fighter jet program.
Canada has officially become Firan’s fastest-growing market.
During the first three quarters of 2026, revenue from Canadian customers surged by an astounding 70.3% year over year as domestic defence spending began trickling down to specialized component manufacturers. Make no mistake, however: the United States remains Firan’s primary revenue source, comprising 70.9% of total sales year to date, while Canada contributed 7.7%.
Firan’s wide geographic distribution provides Canadian investors with the ideal mix, a massive exposure to the world’s largest defence budget alongside explosive domestic growth.
Furthermore, FTG operates specialized manufacturing plants inside both Canada and the U.S., allowing its U.S. facilities to fulfill sensitive Pentagon contracts “In-America for America” without cross-border tariff friction. The company has a facility in China, and recently opened a new facility in India, giving it wider global diversification as it grows market share in Europe and Australia.
Pricing power and margin expansion propel Firan Technology stock’s earnings surge
Beyond geographic tailwinds, FTG recently demonstrated impressive pricing power in an inflationary defence environment. Facing elevated demand across its defence electronics segment, the company successfully raised prices on new orders completed during the third quarter of 2026, as customers eagerly paid pricing premiums for expedited product deliveries.
This pricing power, combined with strong operational leverage, triggered a dramatic increase in profitability. Gross margins expanded to 42.9% during the third quarter, up significantly from 30.3% a year ago. As a result, adjusted basic earnings per share (EPS) surged by 241.7% to $0.41, up from just $0.12 during the third quarter of 2025.
Operating a high-demand business with expanding margins means every incremental dollar of revenue is translating directly into growing bottom-line profits. The stock market rewards such companies with higher equity valuations.
Explosive cash flow fortifies my Buy thesis
Firan Technology’s operational momentum is translating into exceptional balance sheet strength. Cash flow generation is accelerating, with year-to-date free cash flow doubling from $7.3 million a year ago to $14.6 million. That strong cash generation enabled management to completely extinguish all commercial bank debt during the past quarter, leaving the business in a net cash position of $3.9 million.
Meanwhile, quarterly bookings rose 75% to $90.2 million, pushing FTG’s total backlog to a record $220.7 million. This growth provides multi-quarter revenue visibility, and empowers management to execute more boldly on an acquisitions-led growth strategy targeting smaller, accretive aerospace electronics manufacturers at potentially attractive valuations.
FTG stock’s recent surge expanded its forward P/E to 32, a fair multiple given the Canadian defence stock’s current earnings growth rates.
Foolish bottom line
Firan Technology Group is much more than a momentum play. It recently got recognized on the prestigious 2026 TSX30 list of top three-year stock performers. It’s a proven compounder with proven pricing power, expanding cash flow, and a front-row seat to Canada’s growing defence budget, and to rising defence expenditures globally. FTG stock commands top billing for Canadian investors looking for a high-growth TSX defence stock to buy today.
