Written by Jitendra Parashar at The Motley Fool Canada
Shares of Bombardier (TSX:BBD.B) are witnessing a roller coaster in 2023 after staging a spectacular rally of 336% combined in the previous two years. Since the end of March 2023, Canadian business jet manufacturer’s stock has lost nearly 27% of its value to currently trade at $54.41 per share with about $5.4 billion in market capitalization. During the same period, the TSX Composite benchmark has seen a minor gain of 1.7%.
Before we find out whether Bombardier stock is a buy, a sell, or a hold in September, let’s quickly review its recent stock price movement and look at some key fundamental factors behind it.
As COVID-19-driven challenges made investors worried, Bombardier stock tanked by 75% in 2020 from $48.25 to just $12 per share. Nonetheless, the Canadian aircraft maker’s far better-than-expected financial growth helped it regain investors’ confidence in 2021, which led to a spectacular rally of 250% in 2021. This rally extended in 2022, as its share prices advanced by another 25% to $52.27 per share.
BBD stock also started 2023 on a strong, bullish note by rallying 41.2% in the first quarter as investors were pleased with its financial growth trends and hoped for improvements in the global economic outlook. However, as global economic turmoil and high inflationary pressures kept making the economic outlook grimmer, Bombardier stock couldn’t hold these gains for very long and fell sharply in recent months.
Business fundamentals remain strong
It’s important to note that Bombardier has strived to transform its business model since 2015 by increasing its focus primarily on the business aircraft manufacturing segment while exiting other businesses that burdened its balance sheet. Its well-planned strategic initiatives also clearly reflect in its recent financial growth trends.
Despite Bombardier stock’s recent losses, its business fundamentals remain strong, as the company continues to beat Street analysts’ earnings estimates quarter after quarter. For example, in the first half of 2023, its revenue grew positively by about 12% YoY (year over year) to US$3.1 billion with the help of higher aircraft deliveries and a consistent increase in its aftermarket revenue.
As a result, the aircraft maker reported US$1.78 per share in adjusted earnings in the first half of this year compared to an adjusted net loss of US$1.23 per share in the same period last year. Similarly, Bombardier’s adjusted earnings before interest, taxes, depreciation, and amortization margin also improved to 15.5% in the first six months of 2023 from 13.2% in the first six months of 2022.
We shouldn’t forget that stock investing can be more rewarding if you buy a fundamentally strong stock when it looks undervalued and hold it for the long term.
As Bombardier continues to focus on increasing its aircraft deliveries further in the coming years, its financial growth outlook looks strong. Despite this positive factor and the company’s strengthening aftermarket sales, recent big declines in Bombardier stock make it look cheap to buy in September 2023 and hold for years to come. By doing that, you can expect to receive strong returns on your investments and grow your hard-earned savings a lot faster than you think.
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