MDA Space Ltd T.MDA

David Fawcett - Linkedin

[Possibleidiot01]

David Fawcett, MA, CFADavid Fawcett, MA, CFA • 2nd • 2nd Founder of Epic Capital ManagementFounder of Epic Capital Management 4h •

4 hours ago

 

 

 

: —' , !

Let's set the record straight: the big aerospace and defense companies are growing revenue at a steady mid-single-digit pace and are trading at around 15x EV/EBITDA. Meanwhile, MDA is projecting 30% revenue growth not just for this year, but consistently for the next five years—and it's trading at just 7x EV/EBITDA. This appears to be mispriced and presents a highly compelling investment opportunity.

Yet, the street seems fixated on cash flow, overlooking MDA’s robust growth potential. For the past three consecutive conference calls, 80-90% of analyst questions have zeroed in on working capital movements and cash flow ratios relative to growth capex. Sure, these are necessary questions, but the real story here is growth—not cash flow. For the love of God, it's time to refocus and dig into the validity of the growth!

When a CEO tells us they plan to grow 30% annually for the next five years, and the company is trading at a mere 7x EV/EBITDA, we categorize this as a "if this is true, this is a great opportunity.” Our research and due diligence are then focused on validating this growth trajectory, and after many calls with management, competitors, and clients, we believe the data backs it up. The growth was further reaffirmed in the quarter with the increased guidance implying nearly 30% in 2024, after growing 26% in 2023.

We’ve previously shared our thoughts on MDA’s growth prospects, so we won’t dive deep into that again here. But let's be clear: the story is not about this year's working capital movements. If MDA’s growth narrative plays out as projected, EBITDA could triple over the next five years, and the valuation multiple should also rise. That translates to a potential fivefold increase in stock price. That’s the real story.

It’s time for the street to ask the right questions and start recognizing the forest for the trees. MDA's growth potential is the headline, not cash flow minutiae.

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Rob ColcleughView Rob Colcleugh’s profile

Chief Executive Officer

2h

 

 

 

Happy shareholder

 

 

 

 

 

 

 

 

Jonathan LanskyView Jonathan Lansky’s profile

No Straight Lines Investments

4h

 

 

 

Great post sir! Wholeheartedly agree.