Forget Air Canada (TSX:AC) Stock: Here’s a Company That Has a Much Brighter Future!

You don’t need to take on a ton of risk to earn a great return.

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Air Canada (TSX:AC) has gotten a lot of attention in recent months, and it’s hard to really understand why. The business isn’t in great shape, and many investors are betting on a turnaround and hoping that they’ll be able to cash in on some great returns from the stock in a year or two. But the reality is, that’s far from a sure thing. It may get a bailout if COVID-19 continues to destroy its profits, and the government may even take ownership of it if things get especially bad. Young investors may not be aware that it was a Crown corporation in the past, and in 2003 it was granted bankruptcy protection.

While airlines will be around in a post-pandemic world, that doesn’t mean Air Canada will be one of them or that it’ll still be a public company when all is said and done. The company recently released its annual earnings report, and the numbers were abysmal: it burned through $2.4 billion in cash from just its day-to-day operating activities in 2020. That’s a sharp decline from the previous year, where brought in a positive $5.7 billion in cash. While it reported cash and cash equivalents of $3.7 billion as of Dec. 31, 2020, that balance could quickly erode over time, especially since things don’t look to be getting any better soon.

A better option for growth investors

If it’s some great returns that you’re after, then you may want to consider dumping your Air Canada shares and investing them into Fire & Flower (TSX:FAF). The cannabis retail operator isn’t in the business of growing pot and that makes it a bit of a safer buy in an industry where earnings can often be volatile due to writedowns and many inventory-related problems.

And with the backing of Alimentation Couche-Tard, there are some smart people who are bullish on Fire & Flower’s future. Couche-Tard knows a thing or two about growth — it has a network of more than 14,000 stores all over the world, including over 9,000 just in North America.

Through Fire & Flower, Couche-Tard can gain some valuable exposure to the fast-growing cannabis industry. Over the past three quarters, the cannabis retailer generated sales of $84.8 million — more than double the $34.3 million it reported in the same period a year ago. Its operating loss of $12.7 million during that time was also lower than the $17.5 million loss it incurred in the prior-year period.

The company is Canada’s largest retail cannabis operator with more than +75 locations across the country. It uses its Hifyre retail and analytics platform to help understand consumer behaviours that it believes gives it a competitive advantage in the market. Fire & Flower also makes money off the platform, which it makes available to licensed producers. Although digital development revenue of $3.2 million made up a small fraction of the company’s top line over the nine-month period ending Oct. 31, 2020, that segment was also growing at an impressive rate, nearly doubling from the previous year.

In the past 12 months, Fire & Flower’s shares have risen more than 40%. And with a lot more growth still out there for the industry, this could be a much safer option out there for growth investors than Air Canada.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends ALIMENTATION COUCHE-TARD INC.

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