Yahoo Finance Is Now The Time To Put Planet Fitness (NYSE:PLNT) On Your Watchlist?
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Planet Fitness (NYSE:PLNT). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Planet Fitness with the means to add long-term value to shareholders.
See our latest analysis for Planet Fitness
How Fast Is Planet Fitness Growing Its Earnings Per Share?
Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's easy to see why many investors focus in on EPS growth. Outstandingly, Planet Fitness' EPS shot from US$0.64 to US$1.24, over the last year. It's not often a company can achieve year-on-year growth of 93%. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. On the revenue front, Planet Fitness has done well over the past year, growing revenue by 51% to US$914m but EBIT margin figures were less stellar, seeing a decline over the last 12 months. If EBIT margins are able to stay balanced and this revenue growth continues, then we should see brighter days ahead.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Planet Fitness' future EPS 100% free.
Are Planet Fitness Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$6.2b company like Planet Fitness. But we are reassured by the fact they have invested in the company. To be specific, they have US$16m worth of shares. This considerable investment should help drive long-term value in the business. Despite being just 0.3% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Well, based on the CEO pay, you'd argue that they are indeed. The median total compensation for CEOs of companies similar in size to Planet Fitness, with market caps between US$4.0b and US$12b, is around US$8.4m.
The Planet Fitness CEO received US$5.6m in compensation for the year ending December 2022. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Is Planet Fitness Worth Keeping An Eye On?
Planet Fitness' earnings have taken off in quite an impressive fashion. An added bonus for those interested is that management hold a heap of stock and the CEO pay is quite reasonable, illustrating good cash management. The sharp increase in earnings could signal good business momentum. Planet Fitness certainly ticks a few boxes, so we think it's probably well worth further consideration. Before you take the next step you should know about the 2 warning signs for Planet Fitness that we have uncovered.
Although Planet Fitness certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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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.
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