Maxar Technologies: Is Space the Next Investing Frontier?
Image source: Getty Images
While growth investors are focused on artificial intelligence and ChatGPT, another wave of serious innovation is emerging in the commercial space sector. We could be in the midst of a space race that attracts trillions of dollars in investment from the world’s largest corporations and government agencies.
Maxar Technologies (TSX:MAXR) could be at the forefront of this trend. Here’s why the space race is heating up and investors should keep this underrated growth stock on their radar.
The space race
Commercial space technology has improved enough to reignite another space race. This time, the frontrunners are America and China, who see space as a strategic frontier. China already has missions to the moon and Mars. Meanwhile, NASA has completed initial phases of the Artemis mission to the moon and is collaborating with Elon Musk’s SpaceX to eventually carry humans to Mars.
Back on Earth, satellites in orbit are helping your iPhone connect to emergency services and giving Ukraine’s military intel on the ongoing battles with Russian forces. These critical applications cement the value of space technologies and could attract more funding from governments and corporations in the future.
Maxar has always been a key supplier in this sector, which is why it’s a top pick for investors.
Maxar Technologies offers geospatial imagery and robotics to government and corporate clients. Its contract with the U.S. National Geospatial-Intelligence Agency has been instrumental in the Ukraine-Russia conflict. The company also has contracts with the government of Guyana to map out its terrain and a similar project with the U.S. Army’s One World Terrain (OWT) project.
Altogether, Maxar had orders worth U.S.$2.9 billion (C$3.9 billion) on its books at the end of 2022. The spacetech also projected free cash flow of U.S.$290 million (C$390 million) in 2023. Yet, the company was grossly undervalued, which is probably why it attracted the attention of private equity firm Advent.
Advent completed its acquisition of Maxar at U.S.$53.00 per share in cash, valuing Maxar at approximately U.S.$6.4 billion.
Fortunately, there are other ways for Canadian investors to gain exposure to this space race.
Brampton-based space tech firm MDA (TSX:MDA) used to be a part of Maxar, before the company was spun off. Now, the firm is developing the satellites for the iPhone’s emergency services and Canadarm robotic appendage for NASA’s Artemis missions.
MDA’s market value is just $959 million, which implies a price-to-earnings ratio of 28.9. Last year, the company generated $641.2 million in revenue, which means the stock is currently trading at a price-to-sales ratio of 1.5. The company also reported $141.1 million in adjusted EBITDA, which means the small-cap stock is trading at 6.8 times EBITDA.
Similar to Maxar, this company has a robust order backlog of $1.4 billion. Put simply, MDA is an undervalued target just like its former parent company. Growth investors looking for a stake in the space race should add this stock to their watch list.