PLNT - Embedded Expectations Analysis - 2018 02 28
ï€ Planet Fitness (PLNT:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) Earnings, with a 15.6x Uniform P/E, implying bearish expectations for the firm. However, management is confident about their technology and franchise agreements, implying longer-term outperformance is likely, particularly in light of the firm's robust profitability and franchising growth strategyï€ Specifically, management is confident in their opportunity to develop personalized recommendations based on consumers' history and progress, and that the business will continue to improve millions of people's lives each and every day during 2018. Additionally, they are confident that 900 stores have amended their existing franchise agreements at higher royalty rates, and in their plans to have the technological infrastructure and plumbing in place so they have the ability to link up to APIs, whether that be through another app or a loyalty company program. Long-term expectations are therefore far too bearish, and, should the firm execute on its growth strategy and simply maintain Uniform ROA at current levels, further equity upside for PLNT remains warranted
Planet Fitness is a holding company. Through its subsidiries, the company is engaged as a franchisor and operator of fitness centers. The company's stores include co-branded cardio equipment, free weights, strength machines, a workout area, a small retail area and a drink cooler. The company operates and manages its business in three business segments: Franchise, which includes operations related to its franchising business in the U.S., Puerto Rico, Canada, the Dominican Republic and Panama; Corporate-owned stores, which includes operations with respect to all corporate-owned stores throughout the U.S. and Canada; and Equipment, which includes the sale of equipment to franchisee-owned stores in the U.S.
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