Planet Fitness: A Resilient Contender in the Post-Pandemic Fitness Industry
In the unyielding wake of COVID-19, Planet Fitness encountered profound financial turbulence as gym closures became widespread. Despite an initial setback, the company saw its shares rebound, reaching an unparalleled peak in November 2021. However, the journey for shareholders has been fraught with challenges. As of April 16, this fitness growth stock has declined 37% from its zenith, igniting conversations around its potential as a once-in-a-generation investment opportunity.
2023 heralded a remarkable turnaround for Planet Fitness, with the company posting a 14.4% increase in revenue to $1.1 billion—a record-setting achievement. This growth was propelled by an 8.7% rise in same-store sales and the launch of 165 new locations. Moreover, the addition of 1.7 million new members elevated its customer base to 18.7 million, underscoring a robust recovery from the pandemic's depths.
Consumer behavior has notably normalized, a trend that Planet Fitness has capitalized on effectively. Company executives harbor ambitious visions, aspiring to expand the current gym count to 5,000 across the U.S. Achieving this milestone could translate into substantial sales and earnings growth, positioning Planet Fitness as a formidable force in the fitness sector.
The foundation of Planet Fitness's enduring success is its innovative business model, largely centered around a franchise system. With the majority of its 2,575 locations owned by private investors, the company benefits from recurring fees and capital investments made by franchisees. This strategic model has facilitated a nearly $200 million free cash flow, demonstrating the company's capacity for sustainable growth.
Planet Fitness also boasts significant competitive strengths, including a vast national presence and an appealing lowest-priced membership tier at $10 per month. These attributes, combined with the company's marketing prowess and strategic location acquisitions, render Planet Fitness a notable entity in the highly competitive fitness industry.
As investors gauge the value of Planet Fitness stock, they are met with a forward P/E ratio of 24.4, surpassing the S&P 500's average of 21.3. This premium might be warranted given the company's promising outlook, although opinions differ on whether it merits the label of a once-in-a-generation investment.
While Planet Fitness presents a compelling proposition for long-term investors, it may not unequivocally classify as a rare investment gem unless its valuation metrics become even more attractive. Nonetheless, the stock warrants a closer examination by investors looking to diversify their portfolios with a resilient player in the fitness industry.
Analyst comment
Positive news. The market for Planet Fitness is expected to continue growing as the company has experienced a remarkable turnaround with increased revenue and membership numbers. Their innovative business model and competitive strengths position them as a formidable force in the fitness industry. However, investors should carefully consider the stock’s valuation metrics before making a decision.
