Bombardier (TSX:BBD.B) turned around from a company near bankruptcy to a profitable venture in the last three years. Behind the turnaround was Éric Martel, who became Bombardier’s chief operating officer when the company was at its weakest spot in 2020. Between October 2020 and October 2023, the stock soared almost 600%.
It left the commercial aircraft business dominated by government-supported Boeing and Airbus. Bombardier strengthened its balance sheet and downsized its operations to focus on business jets. It is now expanding within the business jet segment and moving to defence and after-market service.
How do the next three years look for Bombardier?
Until 2023, Bombardier’s priority was to reduce debt and report positive cash flow. It achieved this target in 2022 itself. Debt reduction will be one of its priorities for the next three years. However, it will focus on enhancing and expanding its business jet portfolio.
The company has started delivering its new line of Challenger 3500 mid-sized jets and has already received orders worth US$326.4 million for the jet.
The U.S. Army has chosen Bombardier’s Global 6500 and Challenger 650 as a prototype airframe for its spy plane program, High Accuracy Detection and Exploitation System, or HADES. If it turns out to be a success, Bombardier could see a significant order from the defence sector.
With new orders flowing in, the company aims to deliver around 150 aircraft and earn $9 billion in revenue by 2025, growing at an average annual rate of 9.2%. In the next three years, it could likely reduce its balance sheet debt to a level where debt is no longer a cause of concern for shareholders. Low debt is a sign of a growth stock. It gives the company financial flexibility to spend more on research and innovation.
How do the next five years look for Bombardier?
In the medium term, Bombardier is looking to bring its flagship Global 8000 business jet into service. The business jet demand that picked up post-pandemic might slow. Hence, the company is looking to capitalize on more than 5,000 Bombardier business aircraft in service by offering aftermarket service.
The company is looking to make owning and operating a Bombardier aircraft hassle-free by providing end-to-end service. It has opened several factory-owned service centres worldwide and is ramping up its Mobile Response Team to address emergencies and aircraft-on-ground situations. It is a huge market to tap as Bombardier provides maintenance service to a small portion of its planes in the sky.
The Global 8000 and after-market service could be Bombardier’s growth drivers in the next five years. Its stock is still trading way below its future earnings potential. It has the potential to double your money in the next three years.
How do the next 10 years look for Bombardier?
From a long-term perspective, Bombardier looks like a fundamentally strong stock. However, the growth rate will likely stabilize in the future. It remains to be seen how the management scales up operations. One long-term growth prospect the company has started working on is sustainable aviation. At present, it is just a research project, EcoJet, that aims to reshape the design of aircraft in a way that consumes 50% less fuel than today. It is also looking at sustainable aviation fuel.
If this research project materializes into a successful product, Bombardier stock could see significant growth.
Investor takeaway
Now is a good time to buy this stock while it trades at a lower price and hold it for a decade. The company has some secular growth trends and strong implementation that could drive its growth. It could be one of those stocks that could grow your money 10-fold.
