Before market open today, MDA Ltd. (TSE: MDA), a developer and manufacturer of technology and services for the global space industry, reported its Q2-2022 earnings results. The stock closed 2.1% lower today, as it missed both revenue and earnings per share (EPS) estimates and lowered its guidance for the rest of the year.
MDA’s Q2 revenues grew 22% year-over-year, reaching C$154.7 million. However, this missed consensus estimates by C$556,000. Earnings per share of -C$0.07 also missed the C$0.01 consensus. Last year, EPS came in at C$0.00.
Besides the EPS miss, here’s the part that could have scared investors off the most: MDA now expects revenue of C$630 million to C$650 million for the full year compared to previous projections of C$750 to C$800 million. In addition, adjusted EBITDA projections are now C$120 million to C$130 million, lower than the previous estimates of C$140 million to C$160 million.
The lowered estimates are due to a delay in the Telesat Lightspeed program and slower-than-expected progress on government-related work. Also, MDA’s gross margin fell 200 basis points year-over-year to 33.2%.
Nonetheless, MDA still expects a high revenue growth rate of 30% – 35% for the year and 40% – 50% year-over-year growth for Q3. Also, the company’s backlog continues to grow, expanding 138% on a year-over-year basis to C$1.52 billion.
Regarding adjusted EBITDA, it came in at C$34.7 million, representing a 22.4% margin. However, this margin is expected to fall between 19% and 20% for the full year. Lastly, MDA’s operating cash flow was -C$5 million, turning negative from last year’s C$31.8 million figure due to continued investments in a variety of projects.
Is MDA a Good Stock to Buy?
Turning to Wall Street, MDA stock has a Moderate Buy consensus rating based on two Buys assigned in the past three months. Both analysts that cover MDA Ltd. have a price target of C$15, implying 69.7% upside potential. Also, both analysts are highly rated, especially RBC (TSE: RY) Capital analyst Kenneth Herbert, who has a five-star rating and is ranked #186 out of 21,482 overall experts.
Conclusion: MDA is a Stock Worth Considering
Although MDA missed estimates and lowered its guidance, the company still has some positives that make it worth considering. The first positive is its high revenue growth and rapidly-growing backlog, which will help sustain long-term growth. Indeed, MDA’s backlog is about 45% larger than its market cap.
MDA is also EBITDA positive and generated positive cash flow in the past 12 months. Being over 50% off its all-time highs provides an interesting entry point, and two top analysts seem to think so as well, as they expect about 70% upside potential.
