Best Stocks to Buy Right Now: Air Canada or Cineplex?

Air Canada (TSX:AC) and Cineplex (TSX:CGX) appear to be two of the cheapest stocks in Canada. But which is the best stock to buy right now?

| More on:

Some of the best stocks to buy over the last six months have been recovery stocks. However, two stocks that have lagged the market and continue to trade undervalue are Air Canada (TSX:AC) and Cineplex (TSX:CGX). The massive discount in both stocks relative to their historical standards has many Canadians looking at these as top stocks to buy right now.

There’s certainly no question that both stocks present a major opportunity when the pandemic ends, and they can begin to rebound.

However, there’s also a reason Cineplex and Air Canada have lagged the market and continue to trade at these massive discounts to their pre-pandemic prices.

air canada cineplex best stocks to buy right now

Since the start of 2020, Air Canada is down 48%, and Cineplex is down 62%. And while this looks opportunistic, the size of a discount in stocks like these isn’t necessarily what determines if they are the best stocks to buy now.

It’s the price of the stock combined with its current position and outlook that determines its value. And clearly, over the last year, these lower prices are the values that the market has decided that these stocks are worth.

It’s important to understand this because while these stocks may return to their pre-pandemic prices someday, it almost surely won’t be anytime soon.

Although the coronavirus pandemic will only impact Air Canada and Cineplex for a little while longer, they’ve lost a tonne of value during the pandemic. So it will likely be quite a bit of time before the business is worth what it was before the pandemic hit.

Which is the best stock to buy right now?

Given that both stocks are in the same position and are waiting for the pandemic to end so they can return to business as usual, the best stock to buy right now will be based on personal preference.

Air Canada is the stock with more risk right now. The stock is losing a tonne of value each day its operations are put on hold. With that said, though, Air Canada and the travel sector have the potential to bounce back a lot faster than Cineplex.

Cineplex, however, has a more dominant position in its industry. So there’s a lot less risk buying the stock now, especially if the pandemic lasts longer than we all expect it to in Canada.

It’s worth noting that analysts favour Air Canada stock. However, neither company offers incredible value that makes them must-buys today.

A Canadian stock with even more value than Cineplex or Air Canada

If you want to buy a Canadian stock that is truly undervalued, I’d recommend Corus Entertainment Inc (TSX:CJR.B).

While Corus was impacted at the start the pandemic, it has already shown it can handle the adversity and continues to recover and turn its business around.

Unlike Air Canada and Cineplex, which are both still down significantly since January 1, 2020, Corus investors have seen a return of more than 20% through that time.

Despite this recovery and the strong returns that investors have made, the stock still trades ultra-cheap. That’s why, although Air Canada and Cineplex may look undervalued, Corus is one of the best stocks to buy now.

The company is highly profitable, and its stock trades at a forward price to earnings ratio of just 6.7 times. Corus even returns cash to shareholders quarterly with its 4% dividend. And according to analysts, the stock offers more growth potential than Cineplex or Air Canada over the next year.

With a target price of nearly $8.00, Corus has more than 30% upside potential. So if you’re looking for one of the best value stocks to buy today, Corus is one of the cheapest in 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 Daniel Da Costa owns shares of CORUS ENTERTAINMENT INC., CL.B, NV. The Motley Fool recommends CINEPLEX INC.

More on Stocks for Beginners

woman looks out at horizon
Stocks for Beginners

Here’s How Much Canadians at 35 Need to Retire

If you want to create enough cash on hand to retire, then consider an ETF in one of the safest…

Read more »

Concept of multiple streams of income
Dividend Stocks

Got $10,000? Buy This Dividend Stock for $4,992.40 in Total Passive Income

Want almost $5,000 in annual passive income? Then you need a company bound for even more growth, with a dividend…

Read more »

RRSP Canadian Registered Retirement Savings Plan concept
Dividend Stocks

Watch Out! This is the Maximum Canadians Can Contribute to Their RRSP

We often discuss the maximum TFSA amount, but did you know there's a max for the RRSP as well? Here's…

Read more »

a person looks out a window into a cityscape
Dividend Stocks

1 Marvellous Canadian Dividend Stock Down 11% to Buy and Hold Immediately

Buying up this dividend stock while it's down isn't just a smart move, it could make you even more passive…

Read more »

Blocks conceptualizing the Registered Retirement Savings Plan
Dividend Stocks

CPP at 70: Is it Enough if Invested in an RRSP?

Even if you wait to take out CPP at 70, it's simply not going to cut it during retirement. Which…

Read more »

worry concern
Stocks for Beginners

3 Top Red Flags the CRA Watches for Every Single TFSA Holder

The TFSA is perhaps the best tool for creating extra income. However, don't fall for these CRA traps when investing!

Read more »

Data center woman holding laptop
Dividend Stocks

Buy 5,144 Shares of This Top Dividend Stock for $300/Month in Passive Income

Pick up the right dividend stock, and investors can look forward to high passive income each and every month.

Read more »

protect, safe, trust
Stocks for Beginners

2 Safe Canadian Stocks for Cautious Investors

Without taking unnecessary risks, cautious investors in Canada can still build a resilient portfolio by focusing on safe stocks like…

Read more »