Valued at a market cap of almost $11 billion, Bombardier (TSX:BBD.B) has delivered game-changing returns to shareholders in the last five years. Since June 2020, the TSX stock has returned over 850% to investors, outperforming broader market returns by a wide margin.
Let’s see if Bombardier stock can continue to generate outsized returns in the next five years.
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Is Bombardier stock a good buy?
Bombardier delivered exceptional Q1 results, demonstrating the strength of its focused business jet strategy following years of portfolio rationalization.
The Canadian aerospace manufacturer reported impressive double-digit gains, with revenue increasing 19% to US$1.5 billion and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) surging 21% to US$248 million, indicating a margin of 16.3%.
Bombardier successfully navigated tariff uncertainty by confirming that its aircraft are USMCA-compliant (United States-Mexico-Canada Agreement) and exempt from U.S. duties, providing clarity for its largest market, where 60% of its revenue originates.
CEO Éric Martel emphasized management’s confidence by reestablishing full-year guidance after initially withholding projections due to geopolitical volatility.
Bombardier expects to deliver more than 150 aircraft in 2025, with revenue forecast to exceed US$9.3 billion and adjusted EBITDA above US$1.6 billion. The company targets double-digit EBITDA growth, driven by strong margin conversion, an improved aircraft mix that favours high-end Global series jets, and net pricing benefits that offset inflation.
A focus on business transformation
The business transformation since 2018 has created a focused enterprise centered on manufacturing and servicing the Global and Challenger families of business jets. Bombardier now competes primarily with Gulfstream and Dassault in the premium long-range segment, where it commands approximately 35% unit share.
The Global 8000, entering service in 2025, represents the pinnacle of business aviation, boasting unprecedented speed (Mach 0.94) and range (8,000 nautical miles), which reinforces Bombardier’s technology leadership.
Aftermarket services emerged as a key growth catalyst, reaching US$2 billion in revenue in 2024 while growing at a compound annual rate of 10% since 2017. This high-margin recurring revenue stream now represents 25% of total sales and benefits from Bombardier’s expanding installed base of 30% of medium and large business jets globally.
Management has captured 50% of the estimated US$4 billion aftermarket opportunity by 2024 and continues to expand service network capacity worldwide.
Financial discipline remains paramount, with net leverage improving to three times, as the company targets a long-term leverage ratio of less than 2.5 times. Plans include an additional US$600 million in debt reduction in 2025, following the US$300 million paid in the first quarter.
Is the TSX stock undervalued right now?
According to consensus estimates, Bombardier is projected to increase sales from US$8.7 billion in 2024 to US$10.8 billion in 2029. Comparatively, adjusted earnings are forecast to expand from US$5.16 per share to US$10.20 per share in this period.
Over the next five years, Bombardier’s net income is forecast to grow at an annual rate of 14.6%, surpassing its revenue growth estimates of 4.6%.
Bombardier stock trades at a forward price-to-earnings multiple of 13 times, above the 12-month average of 11 times. If the TSX stock is priced at 11 times forward earnings, it should trade around $150 in June 2027, indicating an upside potential of over 35% from current levels.
