It’s been eight months — eight months — of Air Canada (TSX:AC) trading in and around $25 per share. Yet investors continue to watch Air Canada stock as if it’s ready for takeoff when really it’s about as much fun as jumping out of an airplane without a parachute.
And yet again, after a little bit of growth, shares recently fell yet again, by 12% in the last month alone. While there could be a chance that Air Canada stock will rise in the future, it’s a future filled with volatility. Meanwhile, there’s another airline stock that’s already signaled a breakout.
Air Canada stock falls … again
Air Canada stock has continued to struggle to stay in the air for investors. We at the Motley Fool have been following it closely, and it’s clear why. Before the pandemic, shares were at $50 per share, meaning that today’s share price could double if it reaches those highs again.
But notice I said if. It wasn’t that long ago that shares of Air Canada stock fell to below $1 per share. Granted, there was then some major moves that led to the share price we saw before the pandemic. But the problem is, the company relied on revenue streams that have severely changed. Air Canada stock relied on long-haul flights from mainly United States business travelers with layovers in Canada. Travel restrictions have made that a near impossibility today, and even as the world reopens, many opt for short-haul flights — something Air Canada stock continues to attempt, but not with as much success.
So, yes, Air Canada stock has cargo to consider; it has some other new revenue streams; and travel restrictions are due to drop. But it still has so much debt to pay down. And while it hopes many travelers will opt for travel vouchers over refunds, management can’t know for sure. This leaves a volatile situation that, frankly, I would wait to buy in on, at least until there is some far more concrete movement.
This stock is breaking out!
But I wouldn’t stay away from the airline industry altogether. Motley Fool investors simply need to find an airline stock that isn’t Air Canada stock and that’s supported by other revenue streams. Today, that’s Onex (TSX:ONEX). This private equity firm specializes in buying enterprise level companies, with minimum revenues of $300 million. Before the pandemic, Onex stock bought up WestJet. The move wasn’t great in hindsight, but it’s definitely a far better option than Air Canada stock.
And lately, there has been immense positivity for Motley Fool investors to consider. Since 2017, shares in the company were on a falling trend line. But recently, shares have started trading above that line. This signals a breakout in the stock, where investors see an excellent entry point. Shares are already up 56% in the last year, working their way towards those all-time highs seen in 2017.
Then there are the fundamentals to consider, with Onex offering an insanely cheap trailing 3.18 P/E ratio, a 2.4 P/S ratio, and 0.9 P/B ratio. All of this signals massive future growth for the company, especially considering an estimated 234 P/E ratio for the next year! Analysts estimate an average potential upside of 14% for the next year, making this a strong option to consider for any portfolio — and definitely above and beyond Air Canada stock.
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 Amy Legate-Wolfe owns shares of AIR CANADA. The Motley Fool has no position in any of the stocks mentioned.