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Air Canada (TSX:AC) Stock Is Cheap: Is It Time to Buy?

Air Canada (TSX:AC) continues to languish both as a stock and as a business. Despite acquiring some much-needed capital over the past few months ($5.5 billion worth of debt and equity financings), the company still operates dangerously on a lifeline.

Air Canada can’t get a break

Recently, the Financial Post detailed how seriously the Canadian government travel restrictions are impacting Air Canada’s business. Air Canada CEO Calin Rovinescu desperately urged the government to rethink its travel policy amidst the COVID-19 crisis.

I wouldn’t buy Air Canada stock yet

While I feel for Air Canada, it just makes it clearer to me that it is not a stock to buy right now. Yes, its stock is cheap on a price basis, but given that 90% of its business has collapsed, it can be argued that it is actually pretty expensive.

Unfortunately, most of the decline is simply due to reasons that are completely out its control. It can do all the financings it can, but without a solution to the COVID-19 pandemic, the stock will flounder. Unfortunately, the longer this crisis continues, the longer it will take for Air Canada to recover.

Buy stocks with strength today

Rather than speculating about the recovery of cyclical stocks, like Air Canada, I am focusing my attention on stocks that are working today.

With so much COVID-19 uncertainty, I want to own stocks that are operating in this environment with positions of strength. These are stocks with cash-rich balance sheets, strong business growth today, and future earnings growth for tomorrow.

Here are two TSX stocks that are doing just that. Unlike Air Canada, their businesses are growing in the pandemic, and I believe they will be strong performers long into the future.

Instead of Air Canada, buy Descartes Systems stock

The first stock I’d buy over Air Canada is Descartes Systems (TSX:DSG)(NASDAG:DSGX). It is a leader in software, networks, and digital solutions for the logistics industry. The stock is up 86% since March! While it is not cheap, its business has proven resilient in the pandemic crisis.

In its first quarter results, Descartes saw revenues, adjusted EBITDA, and earnings increase over last year by 7%, 15%, and 51%, respectively. The company produced $27 million of cash. It is sitting on a net cash position of around $40 million and nearly $1 billion of liquidity.

With a strong balance sheet, Descartes should meet or exceed its annual adjusted EBITDA growth target of 12-15%. Growth internally and through acquisition (especially into e-commerce) will continue to propel the stock. It has a strong history of outperforming its targets, so I think this is a great stock to own right now.

Buy Calian Group

Another TSX stock I’d buy over Air Canada is Calian Group (TSX:CGY). Its stock is up over 55% since March.

Calian is trading relatively cheap (EV/EBITDA of 13 times) despite demonstrating strong growth over the past three years. The stock pays a decent 2% dividend, but it also has attractive growth prospects.

It delivers a diverse array of niche essential services and technologies in health, technology, learning, and information technology. In May, it grew revenue and EBITDA over the prior year by 25% and 55%, respectively. This was a new record.

Calian has no debt and $33 million in cash. It has a growing $1.5 billion backlog, which will support consistent growth for many years. It continues to win contracts and expand its market verticals.

Like Air Canada, this stock is cheap. Yet, unlike Air Canada, it has earnings growth now, which propels it upwards long into the future.

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Fool contributor Robin Brown owns shares of Calian Group Ltd. and DESCARTES SYS. The Motley Fool recommends Calian Group Ltd.

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