Many stocks from different sectors have rewarded investors with hefty gains during the TSX's bull run in 2024. Portfolio managers and strategists forecast a better year ahead for Canadian stocks despite more rate cuts and emerging investment trends. Expect more winning investments, but one industrial stock should stand out in 2025.
This year, MDA Space (TSX:MDA) in the aerospace and defence industry is among the high-flyers. The $3.4 billion space technology company has visible growth potential because of the expanding and rapidly growing space economy.
As of December 13, 2024, the share price is $28.50, a year-to-date gain of 147.4%-plus compared to the broad market's 20.6%-plus. Market analysts' 12-month high price target is $38 (+33% upside). Furthermore, this industrial stock could be the best investment of the decade.
SpaceTech market
The market size of the global space technology, or SpaceTech, market in 2022 was US$420.2 billion. Based on forecasts, it will grow at a compound annual growth rate (CAGR) of 7.5% from 2023 to 2030. MDA Space has a bold vision for tomorrow and is at the front and center of technological advancements in the space industry.
Orbit and in ground-based command and control stations are now integrating Artificial Intelligence (AI) and Machine Learning (ML) into space systems. Both enable autonomous operations, speed up decision-making, and enhance situational awareness.
MDA develops advanced space technologies, including communication satellites, and space exploration and infrastructure. It also performs Earth and space observation. MDA Space is present in nearly all sectors of the vast space ecosystem. Its Satellite Systems contribute 48% of total revenues, followed by Space & Robotics Operations (30%) and Geointelligence (22%).
According to management, MDA's strategic initiatives span across the three businesses. The objective is to penetrate high-growth markets and geographies while scaling and expanding skills, talent, and operations to meet current and future market demand.
MDA reported strong profit growth in Q3 2024 and increased backlog after three quarters. In the three months ending September 30, 2024, net income climbed 68.5% to $29.5 million compared to Q3 2023. The total backlog at the quarter's end was $4.6 billion, 33% higher than a year ago.
Demand and market activity
MDA's diverse technology offerings will enable it to capitalize on strong customer demand and robust market activity. Business growth is on the horizon, evidenced by the significant pipeline, new programs, and healthy business books. The trusted mission partner also believes that Earth Observation (EO) is critical to improving global sustainability and driving economic productivity.
MDA CHORUS, a next-generation EO satellite constellation and the most extensive radar imaging available in one system, will launch on a SpaceX Falcon 9 rocket in mid-2026. MDA Space partnered with satellite operator Telesat for a low Earth orbit (LEO) constellation program.
Superior returns
Management expects to end 2024 with approximately 30% year-over-year revenue growth versus last year's. The working capital in the Telesat program should likewise deliver positive free cash flow (FCF). Given its engineering excellence in the space industry, MDA Space is well-positioned to deliver superior returns over the next 10 years.
