A stronger connection between Canadian and European space systems sounds remote until you think about the services depending on it. Navigation, communications, and earth observation data support businesses and governments every day. Friday’s Canada-EU summit in Montreal put those systems on the cooperation agenda. And this TSX stock gives investors an existing satellite business that could participate over time, with no need to pretend the next contract is already signed.
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Space supports everyday activity
The joint statement sets out negotiations towards Canadian access to Galileo services and exploratory talks on cooperation with IRIS². Galileo concerns navigation, while IRIS² is a secure-connectivity initiative. These aren’t identical projects, and the discussions aren’t at the same stage. The statement also supports closer Earth-observation cooperation, which can help users understand conditions on the ground.
At the summit, President of the European Council António Costa told media, “And for that, we must live up to our commitments.” Space programmes make the delivery challenge especially clear. Governments need agreements, technical compatibility, procurement decisions, and functioning equipment. A common ambition can open a market, but shareholders benefit only if the company supplies something the programme actually needs at worthwhile terms.
That gives a patient investor two things to separate. The first is a growing need for dependable space infrastructure. The second is which company gets paid to meet it. A Canadian listing doesn’t establish eligibility for every contract or a role in every constellation. Existing customer work provides a much better starting point for choosing the business.
A business already building systems
MDA Space (TSX: MDA) supplies satellite systems, robotics, and other space technology. Its experience connects it to the infrastructure behind communications and observation services. That makes the alliance relevant to its market, although the summit didn’t name MDA as a new Galileo or IRIS² contractor. Any such role would need a separate company or customer announcement.
Second-quarter satellite-systems revenue rose to $336.1 million from $232.6 million. That’s roughly 44.5% growth, with work on Telesat Lightspeed contributing to the increase. The company was already earning from a large satellite programme before the new Europe discussion. That’s the part of the story I find most persuasive for a fresh investment.
More production can also make established engineering and manufacturing capabilities more valuable. A company doesn’t have to invent its entire operating model for each new customer. It still needs to adapt equipment, meet specifications, and deliver reliably. The payoff comes when that experience helps it earn more on the next programme without taking on an unreasonable amount of risk.
Growth needs to support shares
MDA’s latest adjusted diluted earnings were $0.36 per share, slightly below the year-earlier result despite higher adjusted net income. The share count had increased, including through its U.S. offering. That’s a useful reminder that a larger company doesn’t automatically produce the same increase for each owner. Quarterly operating cash flow was also negative $93.4 million as major contracts absorbed cash. Growth needs to reach the earnings and cash attached to the shares you hold.
At the recent closing price of $40.77, the stock cost about 28 times earnings. The price needs support from continued growth. A European opportunity can help the longer-term outlook without making the current valuation irrelevant.
I’d buy gradually for a Canadian growth portfolio, keeping room for project delays and uneven cash collection. Satellite programmes require investment and can depend heavily on a few major customers. A Tax-Free Savings Account (TFSA) can shelter eligible gains from Canadian tax, while the stock still needs a timeline long enough to tolerate setbacks. The next results offer a useful update on existing delivery progress.
Bottom line
MDA is a credible way to participate in space infrastructure through a company already producing revenue. Canada’s closer European relationship could widen the opportunity over time. I’d start with the existing satellite business and add carefully as growth reaches earnings per share. The alliance supplies a possible new market, while the company’s execution needs to supply the return.
