And you can thank the friendly analysts at Goldman Sachs for that.
As StreetInsider.com reported this morning, investment bank Goldman Sachs has just initiated coverage of Maxar Technologies stock with a "buy" rating and a $52 price target that suggests there could be as much as 29% upside in the stock. According to a statement from Goldman:
The company has issued 2023 targets that we believe may actually be a bit conservative, and following a pullback in the stock this year, it now trades at a lower 2023 EV/EBITDA and FCF multiple than any other [defense stock] (7X on both). We expect continued improvement in financials to drive a rerating, as overhang from a challenging past cedes to a promising future.
And Maxar's past has been "challenging," featuring negative free cash flow (FCF) in two out of the past three years (and negative generally accepted accounting principles (GAAP) earnings across the three-year period). And yet, according to data from S&P Global Market Intelligence, based on the guidance that Goldman mentions, Maxar is likely to turn free cash flow positive this year ($28 million), then grow that number 14-fold over the next three years, generating positive cash profits of $385 million by 2024.
If you can wait that long, then with a current $5 billion enterprise value, Maxar stock actually sells for a pretty reasonable 13 times FCF multiple based on 2024 projections. As the cash flows in and the debt gets paid down, things do in fact appear to be looking up for Maxar.