The recent rally in the Canadian stock market gained pace in 2024 as a better-than-feared economic environment, early signs of easing inflationary pressures, and an improved borrowing environment boosted investors’ confidence. As a result, the TSX Composite benchmark jumped 18% last year.
Amid this strong market performance, one top growth stock, MDA Space (TSX:MDA), has skyrocketed 151% over the last 12 months, far outpacing the TSX Composite’s 21% return during the same period. MDA, a leader in space technology, has been on a remarkable growth trajectory, further bolstered by its inclusion in the TSX Composite Index in March 2024.
As we look ahead to 2025, many investors are wondering if MDA’s rally has more room to run. Let’s dive into the key drivers behind MDA’s extraordinary performance to see whether the stock has the potential to double again this year.
Key drivers of MDA stock’s rally
Besides MDA Space’s inclusion in the main index on the Toronto Stock Exchange in early 2024, many fundamental factors contributed to its incredible rise in 2024. One of these factors is the robust growth in MDA’s backlog, which reached $4.6 billion by the end of the third quarter of 2024, reflecting a remarkable 49% YoY (year-over-year) increase. This backlog ensures the company’s revenue visibility for the coming years and underscores its ability to secure significant new orders, including the $1 billion contract for Phases C and D of the Canadarm3 program.
Note that Phases C and D refer to the final design phase and the construction, system assembly, integration, and testing phase of the Canadarm3 program, which is a critical component of NASA’s Artemis program. This MDA-NASA collaboration aims to establish a lunar orbit space station called Gateway, supporting human and robotic missions to the Moon’s surface. These phases focus on building the entire robotics system, including a large robotic arm, a smaller precision arm, specialized tools for maintenance and scientific tasks, and the supporting command-and-control infrastructure.
Solid financials
Besides its improving growth fundamentals, the ongoing trend in MDA Space’s financials also looks impressive. In the third quarter of last year, the company’s revenues surged 38% YoY to $282.4 million with the help of higher work volumes across its Satellite Systems and Robotics & Space Operations businesses.
Similarly, its adjusted quarterly EBITDA (earnings before interest, taxes, depreciation, and amortization) climbed 30% YoY during the same period to $55.5 million and maintained a solid EBITDA margin of 19.7%.
Could MDA stock double in 2025?
It’s very likely that MDA Space’s ambitious projects, like its next-generation Earth Observation constellation CHORUS and its role in the Telesat Lightspeed constellation, could continue to help the company post strong growth. The recent successful completion of major design milestones and the ramp-up of satellite production also demonstrate its increasing focus on the aerospace and defence sectors.
While MDA stock’s over 150% rally in 2024 sets a high benchmark, the combination of a strong backlog, innovative programs, and a well-capitalized balance sheet gives MDA the potential to deliver exceptional shareholder returns in 2025.