Is Bombardier (TSX:BBD.B) Now Fully Priced In – Or Still Undervalued?

The debate over Bombardier Inc. (TSX:BBD.B) has intensified in 2025, as conflicting signals from valuation models and market momentum indicators create a fractured narrative for investors. On one hand, the stock's price-to-earnings (P/E) ratio of 43.57-well above both its peer average of 29.6x and the North American Aerospace & Defense sector's 35.5x-suggests overvaluation according to Simply Wall St. On the other, strong revenue growth, a $753 million contract win, and bullish analyst ratings hint at untapped potential. This article dissects the tension between these perspectives, using Bombardier's recent financials, technical indicators, and valuation discrepancies to assess whether the stock is now fairly priced or still undervalued.

Valuation Models: A Tale of Two DCFs

Bombardier's valuation landscape is marked by stark divergences. A discounted cash flow (DCF) analysis from Alpha Spread estimates the stock's intrinsic value at CA$108.16, implying a 52% overvaluation relative to its current price of CA$224.73 according to Alpha Spread's DCF model. This model assumes conservative cash flow projections, with a total present value of CA$7.9 billion derived from CA$2.4 billion in next-five-year cash flows and CA$5.5 billion in terminal value according to Alpha Spread's DCF analysis. Conversely, Simply Wall St's DCF model arrives at a fair value of CA$333.6 per share, suggesting the stock is undervalued by 31% according to Simply Wall St's analysis. The discrepancy underscores the sensitivity of DCF assumptions, particularly in sectors like aerospace, where long-term cash flow visibility is inherently uncertain.

Meanwhile, the P/E ratio paints a mixed picture. At 43.57, Bombardier's trailing P/E exceeds its estimated fair ratio of 37.7x according to Simply Wall St, yet its forward P/E-factoring in improved margins and revenue growth-could justify a premium. The company's third-quarter 2025 results, which saw revenues rise 11% year-over-year to $2.3 billion and adjusted EBITDA grow 16% to $356 million according to Bombardier's Q3 report, provide a partial defense for the higher valuation. However, the Price-to-Book (P/B) ratio of -2.87-a reflection of accumulated losses and negative equity-remains a red flag according to MLQ AI. This contrasts sharply with the sector's average P/B of 6.83 according to Simply Wall St, highlighting Bombardier's structural challenges.

Market Momentum: Technical Optimism vs. Analyst Caution

Technical indicators suggest Bombardier's stock is in a consolidation phase. The Relative Strength Index (RSI) of 43.984 indicates neutrality according to ChartMill, while the Moving Average Convergence Divergence (MACD) of 4.986 signals potential upward momentum according to ChartMill. Moving averages have also generated 11 buy signals across multiple timeframes, aligning with the stock's 130% rally since 2023 according to GuruFocus. Yet, this optimism is tempered by analyst caution. While 14 analysts have assigned a "Buy" or "Outperform" rating, with an average price target of $156.05 USD according to Marketscreener, Wolfe Research recently downgraded the stock to "Peer Perform," arguing that its valuation has outpaced earnings growth according to GuruFocus.

The disconnect between technical and fundamental signals is further complicated by Bombardier's recent $753 million contract to replace the Royal Canadian Air Force's Challenger aircraft according to CKOM. This deal, coupled with a $16.6 billion backlog as of September 2025 according to Bombardier's Q3 report, has bolstered investor confidence. However, the company's debt-to-equity ratio of -3.53 according to GuruFocus-a result of its negative book value-raises questions about its ability to sustain cash flow improvements.

Reconciling the Divergence: A Turnaround Narrative?

The key to resolving Bombardier's valuation puzzle lies in its turnaround story. The company's third-quarter 2025 results demonstrated operational resilience, with free cash flow surging by $279 million year-over-year according to Bombardier's Q3 report. Its focus on high-margin business jets and services-accounting for 34 aircraft deliveries and $590 million in services revenue-has driven profitability according to Bombardier's Q3 report. Analysts like BMO Capital and RBC Capital Markets have raised price targets, citing these improvements according to Marketscreener.

Yet, the DCF discrepancies persist. The Alpha Spread model's CA$108.16 fair value assumes a conservative discount rate and limited cash flow growth beyond 2029 according to Alpha Spread's DCF analysis, whereas Simply Wall St's CA$333.6 estimate incorporates a more aggressive revenue trajectory according to Simply Wall St's analysis. This divergence reflects broader uncertainties in the aerospace sector, including supply chain risks and geopolitical volatility.

Conclusion: A Stock at a Crossroads

Bombardier's valuation remains a paradox. While its P/E ratio and DCF analysis from Alpha Spread suggest overvaluation, its P/B ratio, recent contract wins, and analyst optimism point to undervaluation. The stock's current price of CA$224.73 sits between these extremes, trading below its estimated fair value of CA$341.7 according to Simply Wall St but above the Alpha Spread DCF estimate.

For investors, the decision hinges on risk tolerance. Those who believe in Bombardier's ability to sustain its turnaround-through continued margin expansion, debt reduction, and execution on its $16.6 billion backlog-may find the stock's 31% discount to the Simply Wall St DCF fair value compelling according to Simply Wall St's analysis. Conversely, skeptics wary of its negative book value and structural debt challenges might heed the Alpha Spread model's warning of a 52% overvaluation according to Alpha Spread's DCF analysis.

In the end, Bombardier's story is one of transformation. Whether it is fully priced in or still undervalued depends not on a single metric, but on the company's ability to navigate its next chapter with the same resilience that fueled its recent rebound.