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According to the government of Canada, “The Canadian space sector has established a world-class reputation in many areas, including in Earth observation, space robotics, space science and exploration, and satellite communications; and continues to innovate into emerging capabilities.” This industry also has a huge role in the country’s nation-building process and as per a 2018 report, it has been generating $5.7 billion in revenues along with contributing $2.5 billion to the Canadian economy. This is where conversation surrounding the best Canadian space stocks enter in.
These days with all the new huge investments being made into this industry, the global space industry appears to have entered a new decade after years of a clash between the two superpowers, the USA and the USSR, since the middle of the 20th century. Recently, it has again started taking a flight with the recent news of Amazon founder Jeff Bezos and Blue Origin taking a successful voyage into the space via Blue Origin’s New Shepard rocket ship. Other than that Elon Musk is also making a significant contribution in fueling the demand for space stocks further.
Therefore, Canadians willing to dive into this growing industry might consider the following best Canadian space stocks:
Magellan Aerospace
Magellan Aerospace is a Mississauga-based aerospace company actively engaged in the designing, engineering, manufacturing, and selling of aero engines and aerostructure assemblies, and other aerospace components. Other than that, the company also provides aerostructure components like landing gear systems, wing ribs and spars, bulkheads and fuselage components, tailcone assemblies, and composite wing and fairing structures. Founded from the remains of a U.S.-based company in 1996, Magellan Aerospace now serves the airlines, space agencies, and military services across the Canadian, the United States, European, and Asian regions.
Despite belonging to a pretty interesting industry, this stock didn’t make any major movements. However, it has been trying hard to make a rebound after losing around 40% in the past 5 years. In the past 12 months, the stock has again grown around 45% and around 16% within this year.
Just like most other industries around the world, the pandemic impacted businesses including air travel that was continuously disrupted. It also hurt the demand for aerospace products and services resulting in the space industry getting impacted as well. Still, Magellan Aerospace has been able to maintain a strong balance sheet even though its revenues have been slipping since the last few quarters. Additionally, the stock also provides a yield of 4.08%.
In the first quarter of this year, Magellan Aerospace had reported a revenue of $176.3 million that was $62.5 million lesser than the revenue of $238.8 million reported in the first quarter of 2020. Revenues in the Canadian region had decreased by 14% due to decreased volumes for casting and proprietary products while in the US it had reduced by around 30% due to volume decreases for wide-body aircraft and aero-engine products. Also, in the European region due to building rate reductions for both single-aisle and wide-body aircraft, the revenue saw a massive 38.1% reduction. With this reduction in revenues, the gross profit and net profit also came down at $17.1 million and $3.3 million respectively compared to the gross profit of $36.8 million and net income of $20.1 million achieved last year during the same period.
The stock is currently selling at $10.30 and has an impressive free cash flow which is 82% of its EBIT. So, as it is still undervalued it is a worthy addition to one’s portfolio now.
MDA Ltd.
MDA is another Ontario-based space technology company that manufactures and develops space technology-based systems. Formerly known as Neptune Acquisition Holdings Inc, the company serves space companies, government agencies, and contractors across Canada, the United States, Asia, Europe, Australia, South America, and internationally.
MDA offers several services like geo-intelligence solutions and other services related to earth observation and intelligence systems that usually provide the country satellite-generated imagery and data for delivering critical and value-added insights about various factors like national security, climate change monitoring, and commerce. The company is also known for things like autonomous robotics and vision sensors that operate in space and on the surfaces of the moon and mars; and satellite systems and spacecraft to enable space-based services, including space-based broadband internet connectivity from low earth orbit satellite constellations.
MDA is one of the growing companies in the space sector. Looking at the growing opportunity of this sector its management has estimated that the company might reach $1.5-trillion by 2040 based on the statistics from the US Chamber of Commerce. MDA is also taking various steps to achieve its target.
In the month of April of this year, the company successfully completed its IPO by raising $460 million to fund MDA’s robust growth agenda along with executing its recently awarded flagship programs – Canadarm3, Canadian Surface Combatant, and Telesat Lightspeed. In its quarter 1 financials, MDA reported a 19.6% increase in its revenues Year-over-year with a massive 129.6% increase in EBITDA. The revenues of its Geo Intelligence sector, Robotics and Space Operations sector, and Satellite Systems sector all grew by 10.6%, 31.4%, and 21.9% respectively thus indicating it has performed really well across all its three business segments compared to the same period last year. Additionally, the company is also trying to reduce its expenses while increasing its business.
The stock has huge potential and is still cheap. So, this is the perfect time to add this one to your portfolios.
It is a fact that the Space Industry has immense growth potential over the coming years. BizVibe has stated that the global space industry on 2018 was valued at $414.8 billion and as per Bank of America, the space economy is expected to more than triple to $1.4 trillion over the course of the next decade. It is a well-known fact that Investing in growing industries usually provides gigantic returns to the investors. Therefore, if you want to book your share of profit add these best players to your portfolios especially now when the demand is steadily rising and the stocks are still cheap.
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