LMN
Lumine group (TSX:LMN) may be one of the best-kept secrets on the TSX right now. Born from Constellation softwareLumine carries the DNA of one of Canada’s most successful technology makers, but trades at a valuation that suggests the market has not yet caught on. While Constellation focuses broadly, Lumine focuses on communications and media technology, software platforms used by telecom companies, broadcasters and media companies around the world.
The Canadian stock’s strategy is simple but powerful: it acquires niche software companies, improves their performance and holds them forever. It’s a model that Constellation has perfected, and Lumine is now executing it in a growing global industry. The financial performance has been quietly impressive. In its latest quarterly results, Lumine reported revenue of approximately $184 million, up 13% from the prior year, driven by both organic growth and new acquisitions. Free cash flow also increased 705%, from $9.7 million to $78.4 million year over year. Management has already guided for sustained margins and active deals through 2025, suggesting this momentum is just beginning.
What’s baffling is how little attention Lumine gets. Constellation Software went through the same early phase of indifference before becoming one of the best-performing stocks in Canadian history. Lumine could follow a similar path if it continues to grow earnings at this pace while remaining undervalued. With its recurring revenue base, disciplined acquisition strategy and deep roots in one of Canada’s biggest tech success stories, Lumine offers a unique blend of security and benefit.
MDA
MDA (TSX:MDA) could be one of those rare Canadian tech and aerospace names that investors will look back on and wonder how it ever managed to trade so cheaply. The Canadian stock is at the center of the booming global space economy, but its valuation still reflects that of a slow-moving industrial company. MDA is Canada’s flagship space technology company, with activities in satellite systems, space robotics and Earth observation. It’s the company behind the iconic Canadarm, but today it does much more than just robotic arms. The technology is used in everything from broadband connectivity and climate monitoring to space missions involving NASA and the Canadian Space Agency.
Financially, MDA is in a growth mode. In its most recent quarterly results, the Canadian stock reported revenue of $373.3 million, up 54% year-over-year, trailing more than $4.6 billion. That backlog is a crucial indicator of future earnings power and represents long-term contracts that will generate stable cash flow for years to come. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) also rose by more than 57%, driven by improved margins and strong demand across all segments.
Yet there is more to come. MDA is a leader in space robotics, a field with enormous long-term potential. It is currently developing the Canadarm3 for NASA’s Lunar Gateway. This program alone provides insight into revenues over several years, with contracts supported by the Canadian government. But what’s most compelling is how undervalued the growth story still is. MDA’s order book, diversified revenue streams and expansion into high-demand sectors such as satellite manufacturing give the company much greater visibility than most small and mid-cap technology stocks.
In short
Investors looking for Canadian stocks poised for even greater success should definitely add this one to their watchlist. Whether it’s the growing field of media and telecom acquisitions or the growing gap in space robotics, there’s one thing both Canadian stocks have going for them. That is recurring income. And that’s something every Canadian investor can hold on to for the long term.
Lumine is growing by acquiring niche communications software companies, rapidly increasing recurring revenue and free cash flow.
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