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Can Planet Fitness’ Higher Cash Flow Offset Weak Club Performance And Reframe Its Growth Story (PLNT)?

Simply Wall St · 5d ago
  • Recently, commentary around Planet Fitness highlighted two years of weak same-store sales and shrinking returns on capital, raising concerns about the effectiveness of its growth investments.
  • At the same time, expectations for a higher free cash flow margin suggest the company may have more flexibility to fund club reinvestment or return cash to shareholders despite these operational headwinds.
  • Next, we’ll examine how Planet Fitness’s weak same-store sales and pressured returns on capital may influence its long-term investment narrative.

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Planet Fitness Investment Narrative Recap

To own Planet Fitness, you have to believe its low cost, high volume model can still grow membership and cash generation despite uneven club performance. The recent commentary on two years of weak same store sales and shrinking returns on capital directly pressures that belief, but the expectation of a higher free cash flow margin softens the near term risk by giving the company more room to reinvest or support shareholders.

The recent refinancing of US$750,000,000 of senior secured notes, with fixed rates and staggered 5 and 7 year maturities, ties in closely with these concerns. It shores up liquidity and extends debt maturities at known costs, which can support continued investment in the club base even as same store trends remain under scrutiny and returns on capital come into question.

Yet, while the balance sheet flexibility helps, investors should still be aware of the risk that heavy reliance on opening new clubs to drive growth could...

Read the full narrative on Planet Fitness (it's free!)

Planet Fitness' narrative projects $1.6 billion revenue and $312.8 million earnings by 2028. This requires 11.6% yearly revenue growth and about a $123.8 million earnings increase from $189.0 million today.

Uncover how Planet Fitness' forecasts yield a $130.41 fair value, a 24% upside to its current price.

Exploring Other Perspectives

PLNT 1-Year Stock Price Chart
PLNT 1-Year Stock Price Chart

Three fair value estimates from the Simply Wall St Community span a wide range between US$37.05 and about US$130.41, underlining how differently people assess Planet Fitness. As you weigh these views, keep in mind that recent pressure on same store sales and returns on capital sits against a business model that still leans heavily on new club openings to support performance.

Explore 3 other fair value estimates on Planet Fitness - why the stock might be worth less than half the current price!

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.