Yahoo Finance The three-year decline in earnings for Planet Fitness NYSE:PLNT) isn't encouraging, but shareholders are still up 131% over that period
It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But if you buy shares in a really great company, you can more than double your money. For example, the Planet Fitness, Inc. (NYSE:PLNT) share price has soared 131% in the last three years. Most would be happy with that. Then again, the 9.3% share price decline hasn't been so fun for shareholders. This could be related to the soft market, with stocks down around 6.6% in the last month.
While the stock has fallen 3.1% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.
Check out our latest analysis for Planet Fitness
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During the three years of share price growth, Planet Fitness actually saw its earnings per share (EPS) drop 6.2% per year.
Thus, it seems unlikely that the market is focussed on EPS growth at the moment. Therefore, we think it's worth considering other metrics as well.
It could be that the revenue growth of 16% per year is viewed as evidence that Planet Fitness is growing. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Planet Fitness is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think Planet Fitness will earn in the future (free analyst consensus estimates)
A Different Perspective
Planet Fitness shareholders are down 13% over twelve months, which isn't far from the market return of -12%. Longer term investors wouldn't be so upset, since they would have made 15%, each year, over five years. If the stock price has been impacted by changing sentiment, rather than deteriorating business conditions, it could spell opportunity. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Planet Fitness has 2 warning signs we think you should be aware of.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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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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