It was a rough start to the week for stock market investors here, in the final days of September, as the Dow Jones and the Standard & Poor's 500 both slipped more than one percent to notable lows. As a matter of fact, the 30-stock Dow Jones is now down more than 20 percent from its January 4th high, and the S&P fell to a new low (at 3,655.04). The Nasdaq fared only slightly better, tumbling 0.6 percent, to 10,802.92.
A Strong Showing In A Tough Environment
That said, Planet Fitness, Inc (NYSE: PLNT) seems to be one of only a few stocks, right now, helping to shore up its index. For one, it is up 35 percent since going public, a year ago. In addition, the chains have expanded to more than 1,200 nationwide and same-store sales are up 7.6 percent. In fact, Planet Fitness leads fitness stocks—and is the only gym in the top 5—followed by fitness equipment companies Peloton (NASDAQ:PTON) and Nautilus (NYSE:NLS) and apparel firm Lululemon (NASDAQ:LULU).
In the final week of September, then, the gym chain received an impressive analyst upgrade to STRONG BUY. Accordingly, some would advise that the Planet Fitness has a resilient business model that has been quite resistant to the imposing recession. Furthermore, they have no interest rate risk and remarkably little near-term debt.
Most importantly, perhaps, their current valuation is well below its historical average. For example, while the current price target seems aligned with the company's recent trajectory—and is in the upper half of the day-range—the value is still near the bottom of both the 52-week range ($54.15 to $99.60) and the 50-day range ($55.88 to $81.22).
More than a dozen analysts offering 12-month price forecasts for Planet Fitness Inc have settled on a median price target of $94. This target is nearly in the center of the range estimate, which is $73 on the low end and $115 on the high side. Analysts also seem to agree that the stock has a significant potential upside, though they do not agree on the ratio. On average, the predicted upside could be just north of 30 percent.
Consistent Quarterly Earnings Maintain Analyst Confidence
Although earnings expectations have not been consistent, reported earnings have always met or beat the estimate over the past several quarters. This is very telling, and perfectly in line with what analysts believe about the stock. For example, analysts offered an estimated earnings range of $0.12 to $0.27 with a consensus estimate of $0.18. Actual reported earnings nearly beat the range, coming in at $0.25.
The following quarter was also a good one, though not quite as impressive. To put it simply, reported earnings for 2021 Q4 met the $0.26 consensus estimate which was, admittedly, in the lower third of the range.
By the first quarter of 2022, Planet Fitness reestablished some of its momentum, beating the estimate again. In this three month period, analysts gave a range of $0.15 to $0.33 with a consensus estimate of $0.27. Reported earnings came in about twenty percent higher, at $0.32.
Q2 of 2022 settled down a bit, mirroring the previous dip. But while volume declined again, earnings did not disappoint. Although in the lower third of the range, reported earnings met the $0.38 consensus estimate on sales of $235.9M. Their next reporting date is November 8, 2022.
Impressive Annual Earnings Boost Analyst Ratings
Annually, the numbers look even better. After all, reported earnings—on an annual basis—outperformed the consensus estimate 2 out of the past 4 years. While earnings may have disappointed in 2020, the pandemic provided concessions for many industries struggling to stay afloat during the shutdown. Indeed, it was a particularly difficult year for businesses like fitness clubs, as members may have opted to forgo their dues as they avoid public gatherings.
That said, 2018 earnings of $1.22 beat the $1.20 estimate, but not the top of the range. In 2019, the $1.59 reported earnings performed even better by not only beating the estimate, but satisfying the top of the estimate range.
Again, 2020 earnings could appear like things were suddenly going downhill but the big dip could have been just an anomaly in unprecedented time. For 2020, analysts expected earnings to struggle, as they posted an estimate range of $0.00 to $0.15 with a humble consensus estimate of just $0.09. Unfortunately, reported earnings were only $0.04
On the other hand, analysts expected a quick recovery from Planet Fitness in 2021, as they estimated an earnings range of $0.78 to $0.93; more than 5 times more than the previous year. Sure enough, the consensus estimate was perfectly in line with the actual reported earnings of $0.82.
The combination of consistent growth and a solid turnaround has helped boost PLNT's rating to STRONG BUY.
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