Here’s Why This Canadian Aerospace Stock Is Still a Risky Bet

Bombardier Inc. (TSX:BBD.B) may have been great for momentum investors over the last couple of days, but is it a buy for everyone else?

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

There’s plenty of column space being devoted to the following major Canadian aerospace stock, which has seen a big flurry of investor interest in the past week. One of the biggest aviation tickers on the TSX index and arguably the biggest deal in Canadian defense stocks, Bombardier has seen significant short-term volatility in this asset in the last 10 days. We’re going to go through a few key pieces of data to see whether to buy, hold, or sell, and how deep a position to take.

Bombardier (TSX:BBD.B)

Following its recent crash in share price and subsequent sudden climb, Bombardier is a really interesting TSX stock to watch at the moment. But is that all it is at present? It’s climbed 3.29% in the past five days, with 15.9% seven day returns, and saw some pretty wild turbulence in the days preceding that period. But with one-year returns down 26.6%, is this stock too much of a liability for long-term investors?

A one-year past earnings growth of 95.9% is tremendously positive, and rescues a five-year average past earnings growth percentage, bringing it up to -5.4% and showing that the last 12 months have been good ones on the whole for this popular aviation stock.

There aren’t many Canadian stocks with $5 billion market caps that oscillate quite like Bombardier has in the last couple of weeks, making this a briefly volatile defensive stock. A PEG ratio in the red doesn’t help with valuation, so to get the lowdown on whether to buy long-term for capital gains, we’ll need to dig a little deeper.

Value, quality, and momentum

Bombardier’s P/E and P/B ratios are both in the red, so there’s little confirmation regrading value to be had in that department. The absence of dividends does not further the cause for Bombardier stock in terms of value, given the usual indicators. However, using a comparison with future cash flow, we can see a suggestion of undervaluation: its share price is discounted by just over 20% compared to its future cash flow evaluation.

Where quality is concerned, it’s up to a future gains outlook to pick up the slack – and it does just that, with Bombardier looking at a 48.7% expected annual growth in earnings. However, a negative EPS does leave quality-hunting stock-pickers with a bit of a head-scratcher. It’s probably best to hold this stock if you’ve got it in your portfolio, especially given its recent turbulence, while newcomers still have a chance to buy at a reduced price.

Moving on to momentum, we can see that at one point in the last few days, Bombardier had 43.71% five-day gains – yes, you did read that right, and no, that decimal point is not in the wrong place. That margin has now shrunk back to still-positive but greatly reduced levels, with a beta of 1.62 relative to the TSX index indicating its usual medium volatility.

The bottom line

Debt-wise, this company is holding negative shareholder equity, effectively meaning that its assets are outweighed by its liabilities. But let’s contrast this with a positive analysis of its balance sheet, which asserts a plus-three year cash runway. Also, with more inside buying than inside selling in the last 12 months, there are at least a few positive signs that this TSX index staple has the potential to make Canadian investors money with aerospace stocks.

Should you invest $1,000 in Royal Bank of Canada right now?

Before you buy stock in Royal Bank of Canada, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Royal Bank of Canada wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Victoria Hetherington has no position in any of the stocks mentioned.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Tech Stocks

The letters AI glowing on a circuit board processor.
Tech Stocks

How I’d Allocate $10,000 to AI Stocks in Today’s Market

Shopify (TSX:SHOP) is one of Canada's most compelling AI stocks.

Read more »

Canada day banner background design of flag
Tech Stocks

The Top Canadian Stock to Buy With $5,000 in 2025

There are few Canadian stocks out there that offer the outlook of this tech stock, bound for more growth.

Read more »

ways to boost income
Tech Stocks

How I’d Invest $11,500 in Canadian Fintech Stocks to Revolutionize My Finances

Propel Holdings stock's recent dip could be a trading opportunity for long-term financial gains. Here's why the fintech stock is…

Read more »

Start line on the highway
Tech Stocks

Where I’d Invest $5,000 in Growth Stocks With Long-Term Potential Through 2030

DO you have $5,000 to invest to grow your wealth over the long term? These growth stocks could deliver strong…

Read more »

A shopper makes purchases from an online store.
Tech Stocks

Buy the Dip on the Return of Recession Stocks?

If a recession comes back, there are some stocks that could fair well afterwards. And this is one of the…

Read more »

data center server racks glow with light
Tech Stocks

April Opportunity: Where I’d Invest $7,000 in These 3 Tech Stocks Right Now

These tech stocks have solid growth potential and are trading at discounted valuation, providing a solid buying opportunity in April.

Read more »

The letters AI glowing on a circuit board processor.
Tech Stocks

If I Could Only Buy and Hold a Single U.S. Stock, This Would Be It

You don’t need 40 different stocks to build wealth. A few good ones can boost your portfolio, and this U.S.…

Read more »

cloud computing
Tech Stocks

2 Top Canadian Information Technology Stocks to Buy Right Now

These two Canadian information technology stocks are bargains amid the downturn in the broader market for long-term investors.

Read more »