MDA Space (TSX:MDA) Expands Lightspeed Contract, Is The Upside Already Priced In?
MDA Space (TSX:MDA) is back in focus after expanding its role in Telesat's Lightspeed low Earth orbit constellation, adding CA$474 million to its contract and deepening exposure to long term defence communications work.
See our latest analysis for MDA Space.
After a strong year to date with a 79.91% share price return and a 3 year total shareholder return above 3x, MDA Space has recently regained momentum. The 1 month share price return of 11.26% and Lightspeed contract expansion, debt raise and guidance update have all fed into renewed interest around CA$49.71.
If the defence and satellite story around MDA Space has your attention, it can be useful to see what else is moving in related infrastructure by checking the 36 power grid technology and infrastructure stocks
After that contract uplift, guidance tweak and CA$600 million debt raise, the share price already reflects a lot of optimism in MDA Space. Does the current valuation still leave enough upside to justify taking on the risks from here?
Most Popular Narrative: 40.7% Undervalued
The most followed narrative currently values MDA Space at CA$83.84 per share compared with the CA$49.71 last close, which frames a sizeable valuation gap that hinges on aggressive growth assumptions and a higher future earnings multiple.
The rapid militarization of space and rising geopolitical tensions are driving a worldwide step-up in government space, defense, and Earth observation investment. As one of very few companies with proven large-scale space robotics, surveillance, and synthetic aperture radar platforms, MDA is described as uniquely positioned to capture a disproportionate share of this growing, multi-decade global budget, providing long-term revenue compounding and margin stability.
Want to understand why this narrative backs premium earnings growth and richer margins for MDA Space? The entire valuation rests on how far those assumptions can stretch.
Result: Fair Value of CA$83.84 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, you still need to weigh the risk that large contracts such as Canadarm3 or CHORUS slip, or that higher capital costs limit MDA Space investment plans.
Find out about the key risks to this MDA Space narrative.
Another View: What Market Ratios Say About MDA Space
The SWS DCF model sees MDA Space as trading about 13.9% below an estimated fair value of CA$57.74, so it still screens as undervalued. That sits against a current P/E of 76.1x, which is higher than both the industry average and the modelled fair ratio of 61.4x.
For an investor, that mix of discounted cash flow support and rich earnings multiple raises a clear question. Is the current price giving you enough margin for error if growth or margins end up closer to the middle of the analyst range, rather than the most optimistic end of it? Look into how the SWS DCF model arrives at its fair value.
Next Steps
If the mixed sentiment around MDA Space leaves you unsure, it is worth checking the full picture now and weighing both sides for yourself with 3 key rewards and 4 important warning signs
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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