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What’s Ahead For Bombardier Inc (TSX:BBDB)?

Bombardier Inc (TSX:BBD.B), a CADCA$6.76B mid-cap, is an aerospace and defence (A&D) company operating in an industry, which is undergoing restructure to capture new tech-driven opportunities. Capital goods analysts are forecasting for the entire industry, a somewhat weaker growth of 8.56% in the upcoming year , and an enormous growth of 30.78% over the next couple of years. However this rate still came in below the growth rate of the Canadian stock market as a whole. Today, I will analyse the industry outlook, as well as evaluate whether BBD.B is lagging or leading in the industry. See our latest analysis for BBD.B

What’s the catalyst for BBD.B’s sector growth?

TSX:BBD.B Past Future Earnings Nov 14th 17
TSX:BBD.B Past Future Earnings Nov 14th 17

Stable global gross domestic product growth, relatively lower commodity prices including crude oil, and strong passenger travel demand, especially in the Middle East and Asia Pacific regions, will likely drive the commercial aerospace sub-sector growth. In the previous year, the industry endured negative growth of -5.82%, underperforming the Canadian market growth of 8.26%. BBD.B leads the pack with its impressive earnings growth of 52.53% over the past year. This proven growth may make BBD.B a more expensive stock relative to its peers.

Is BBD.B and the sector relatively cheap?

A&D companies are typically trading at a PE of 25x, above the broader Canadian stock market PE of 17x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry did return a higher 12.56% compared to the market’s 9.62%, which may be indicative of past tailwinds. Since BBD.B’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge BBD.B’s value is to assume the stock should be relatively in-line with its industry.

What this means for you:

Are you a shareholder? BBD.B recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto BBD.B as part of your portfolio. However, if you’re relatively concentrated in A&D, you may want to value BBD.B based on its cash flows to determine if it is overpriced based on its current growth outlook.

Are you a potential investor? If BBD.B has been on your watchlist for a while, now may be the time to enter into the stock, if you like its ability to deliver growth and are not highly concentrated in the A&D industry. Before you make a decision on the stock, take a look at BBD.B’s cash flows and assess whether the stock is trading at a fair price.

For a deeper dive into Bombardier’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other capital goods stocks instead? Use our free playform to see my list of over 100 other A&D companies trading on the market.


To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.

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