Planet
Fitness Inc. (PLNT, $50.02): “Let’s Make Some Gains”
By:
Sarfaraz Mohammed, AIM Student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
Summary
• Planet Fitness Inc. (NYSE:PLNT) is American franchisor based in Hampton,
New Hampshire. Planet Fitness provides gym membership services for individuals
looking to improve their fitness and overall well-being and emphasizes its “Judgment
Free Zone,” which provides a non-intimidating gym environment for its members.
• In its latest quarterly
report, PLNT indicated that it has 12.1 million members, and 1,608 owned and
franchised locations. This is a pleasant
increase since its 2017 10-K, which reported having 10.6 million members.
• PLNT has a highly
attractive franchise system which is built for growth. This allows franchisees to easily adopt their
model, making it appealing and easy for PLNT to increase their store numbers.
• The company is focused
heavily on expanding and increasing their store numbers, even internationally. For the first 2 quarters of 2018, PLNT opened
91 stores total. Its franchisees have
signed ADAs to open more than 1,000 stores over the next 5 years as of the end
of 2017.
• Over the past year, the
stock has increased from a share price of $26.40, to $50.02 currently. This
represents a YoY upside of 89.47%.
Key
points:
Planet Fitness is a market leader in providing gym
memberships to all types of individuals looking to improve their fitness and
overall well-being. Its main driver is its differentiated gym membership
experience. As mentioned previously,
PLNT focuses on providing a space that is non-intimidating, so that all its
members, beginners and experts can have an enjoyable experience at the gym.
Planet Fitness has
predictable and recurring revenue streams with high cash flow conversion. In 2017, approximately 90% of both their
corporate-owned stores and franchises consisted of recurring revenue streams,
including royalties, vendor commissions, monthly dues and annual fees. Their
business model is intriguing as a gym membership at Planet Fitness only costs
$10 for its standard membership and $19.99 for its Black Card membership. This is significantly different from other
gyms who typically charge around $50 monthly for their memberships.
Planet Fitness Inc. has a
strong and proven management team. PLNT’s
CEO, Chris Rondeau has been with the company for 25+ years and has helped
developed its business model. Also their
CFO, Dorvin Lively has had experience in corporate finance for over 35 years
and they both help drive the culture and believe in ‘Fitness for Everyone.’
Planet Fitness is all about growth. It aims to expand its stores and
members. By providing a low cost membership
and easy franchise model, it is easy for the company to do. It’s planning to open 500 new stores in the
next 3 years and has 1000 stores already signed for in the next 5. Growth is a key driver for this company, and
with its strong management, it’s more than possible.
What
has the stock done lately?
Planet Fitness has been
improving steadily. Its earnings growth
has steadily increased and has come in at 19%, 20%, 42%, and 55% over the past
4 quarters. PLNT has showed potential
for strong earnings growth going forward.
Many investors are also investing in the company further, as Syntal
Capital Partners LLC purchased a new position in PLNT during the 2nd
quarter, purchasing 45,525 shares valued at ~$2,000,000.
Past
Year Performance:
PLNT has made some serious ‘gains’ this
past year as it’s stock price has increased ~89% over the past year. This is exceptionally strong growth and with
its strong management team and growth plans, it seems this trend will continue
upward.
Source:
FactSet
My
Takeaway:
Planet Fitness Inc. holds
a unique business model attracting many new customers and its easy to operate
franchise model makes it easy for franchisees to open up stores. Additionally, PLNT has a strong management
team and a solid plan for growth going forward as well. Due to these factors, as well as impressive
earnings historically, I am recommending a buy for this stock going forward as
I expect the positive tide to continue.
