Intrinsic Value Planet Fitness, Inc. (0KJD.L)

• Previous Close: £89.60
• Intrinsic Value: £51.67
• Upside potential: -42%

Stock Valuation Context

Business Model And Market Position

Planet Fitness, Inc. operates as a franchisor and operator of fitness centers under its eponymous brand, targeting value-conscious consumers with a low-cost, high-volume membership model. The company generates revenue through franchise fees, corporate-owned gym operations, and equipment sales to franchisees. Its 'Judgement Free Zone' positioning differentiates it from premium fitness competitors, appealing to casual gym-goers seeking affordability and inclusivity. With over 2,250 locations across the U.S., Canada, and select international markets, Planet Fitness holds a dominant position in the budget fitness segment. The franchise-heavy model provides scalable growth with relatively low capital intensity, while corporate stores serve as proof-of-concept for new markets. The company benefits from recurring membership revenue and ancillary income streams like tanning and hydro-massage services. Competitive pressures exist from both traditional gyms and digital fitness platforms, but Planet Fitness's value proposition and national footprint provide resilience. Its expansion strategy focuses on white space opportunities in existing markets and measured international growth.

Revenue Profitability And Efficiency

In its most recent fiscal year, Planet Fitness reported $1.18 billion in revenue with $172 million in net income, translating to a 14.6% net margin. The company generated $343.9 million in operating cash flow against $155.1 million in capital expenditures, demonstrating strong cash conversion. The franchise segment typically delivers higher-margin revenue compared to corporate-owned locations, contributing to overall profitability.

Earnings Power And Capital Efficiency

With diluted EPS of $2.00, the company shows consistent earnings power supported by its capital-light franchise model. The equipment segment provides additional margin enhancement through sales to franchisees. Return metrics are bolstered by high membership retention rates and low customer acquisition costs relative to industry peers.

Balance Sheet And Financial Health

The balance sheet shows $293.2 million in cash against $2.58 billion in total debt, reflecting the company's leveraged growth strategy. The absence of dividends allows for debt service and reinvestment in growth initiatives. Operating cash flow coverage of interest expenses appears adequate given the stable membership-based revenue model.

Growth Trends And Dividend Policy

Planet Fitness has pursued aggressive unit expansion, adding stores at a mid-single-digit percentage annually. The company retains all earnings for growth, with no current dividend policy. Same-store sales growth and new market penetration remain key metrics for evaluating expansion success. International markets represent a small but growing portion of the store base.

Valuation And Market Expectations

At a $8.76 billion market capitalization, the stock trades at approximately 7.4x revenue and 51x trailing earnings, reflecting growth expectations. The 1.332 beta indicates higher volatility than the broader market, typical for consumer discretionary stocks. Valuation multiples suggest investors anticipate continued unit growth and margin expansion.

Strategic Advantages And Outlook

Planet Fitness's primary competitive advantages include its strong brand recognition, standardized operating model, and economies of scale in equipment procurement. The outlook remains positive given underserved markets in North America and potential for international expansion, though macroeconomic sensitivity to consumer discretionary spending bears monitoring. Digital fitness competition presents a long-term structural challenge requiring ongoing adaptation.

Sources

Company filings, market data