Can Bombardier Stock Keep Pace With Recent Gains?

Bombardier Was A TSX Top Gainer In 2021, Can They Keep It Going In 2022?

E-commerce and related technology stocks performed extremely well, but the hospitality and travel industries are still reeling under tremendous pressure. Bombardier strock (TSX:BBD.B) was one that saw its fortunes change dramatically during the pandemic.

One 2021's best TSX stocks

Last year, the business jet builder Bombardier shrugged off bankruptcy worries and rose to one of the best-performing Toronto Stock Exchange (TSX) companies. When the TSX Composite Index rose 20%, BBD stock surged 260%. Last year's spectacular rise was especially welcome for investors, particularly given the years of decline it had suffered.

In 2021, the company's cash position improved; however, it was helped by its long-anticipated partnership with Alstom. Following the sale of its train manufacturing unit, Bombardier began restoring itself with its only profitable sector: private jet production.

In the first nine months of this year, Bombardier reported $4.3 billion in revenue, up 4% compared to the same period last year. Despite mediocre top-line growth, it shows an ongoing turnaround that is progressing.

Increased demand for business jets, owing to the fact that many passenger airlines were still grounded led to a small increase in revenues. Last year and in 2020 saw a significant rise in private travel, which was reflected in Bombardier stock.

What’s in the future for BBD stock?

The business jet maker’s financial growth will likely be more correlated with corporate earnings growth this year. While earnings at large are expected to be encouraging this year, full re-openings and public travel resumption could adversely affect Bombardier.

After dropping to a 52-week low of $0.48 in January 2021, BBD stock has made significant progress since then at $1.7 per share. The stock has been down almost the entire fourth quarter 2021, with a 25% loss since its previous high of $2.26.

During this time, the stock's value suffered as profit booking hit record levels, pushing downward pressure on the stock. In addition, inflation and concerns about future interest rates weighed heavily on growth equities late last year.

While the stock's price may appear appealing at $1.7, BBD is a risky bet. Its price-to-sales ratio appears to be appealing at 0.61. The EV-to-EBITDA ratio, on the other hand, is excessive at 13 times levels.

The Takeaway

However, while Bombardier's turnaround appears to be a success story in the making, it is too early to call it a victory. However, the revenue increase in the next few quarters will be key to track and will serve as an impetus for the stock.

It will be fascinating to watch how Bombardier manages the increasing rivalry in the new business cycle. The key to market share may lie in the correct product mix. Simultaneously, improving financial stability must be a top priority, which should drive BBD stock back to its formerly grand heights.

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