Is Planet Fitness a Buy as Low Valuation Meets Slower Member Growth?

Planet Fitness, Inc. PLNT offers investors a clear trade-off. The stock's valuation has compressed sharply, while its franchise-heavy model still supports a long runway for unit growth.

The operating picture is less settled. Membership was flat sequentially in the second quarter, same club sales growth came from higher rates and margins narrowed, leaving execution as the main question behind the discount.

PLNT's Valuation Discount Strengthens the Case

PLNT trades at 15.9X forward 12-month earnings, below the Zacks sub-industry's 17.8X, the sector's 16.6X and the S&P 500's 20.4X. That gives the shares a discount to multiple benchmarks.

The gap is wider against PLNT's own history. Its current multiple is well below the five-year median of 31.1X, reinforcing the valuation discount.

Planet Fitness, Inc. Price and Consensus

Planet Fitness, Inc. price-consensus-chart | Planet Fitness, Inc. Quote

Planet Fitness Needs a Member Growth Rebound

Planet Fitness ended the second quarter with 21.5 million members, up 3.6% year over year but unchanged from the first quarter. System-wide same club sales rose 1.7%, with the increase entirely driven by rate growth.

Average monthly attrition was 3.5%, within management's historical 3%-4% range. That points to member acquisition, rather than unusual churn, as the more important issue. Management is responding with pricing tests, refreshed marketing, a redesigned app and retention initiatives, but several efforts will take time to gain traction.

PLNT's Franchise Pipeline Adds Long-Term Support

Planet Fitness had 2,930 clubs at June 30, including 2,636 franchise-operated locations. It also had contractual commitments for approximately 800 additional clubs, giving the system a sizable development pipeline beyond 2026.

Management continues to expect 180-190 system-wide openings and 150-160 equipment placements in franchisee-owned locations this year, with the remaining activity weighted toward the fourth quarter. Life Time Group Holdings, Inc. LTH is included in the industry's peer group. Xponential Fitness, Inc. XPOF is another peer in the same comparison set.

Planet Fitness Faces Margin and Financing Pressure

Adjusted earnings before interest, taxes, depreciation and amortization increased 3.5% in the second quarter to $152.8 million, but the adjusted margin narrowed to 41.8% from 43.3%. Franchise margin pressure largely reflected a higher National Advertising Fund contribution rate, while equipment margin was affected by the timing of replacement-equipment discounts.

Financing adds another drag on earnings conversion. Full-year interest expense is now expected to be approximately $115 million, up $4 million from prior guidance, and adjusted net income is projected to decline approximately 3% even as revenues are expected to increase approximately 7%.

PLNT's Mixed Signals Favor a Measured View

The valuation discount and franchise pipeline provide support, but a cleaner upside case likely depends on renewed member acquisition and better earnings conversion. The back-loaded development schedule also leaves less room for execution delays before year-end.

PLNT currently carries a Zacks Rank #3 (Hold). It also has a Value Score of B and a VGM Score of B, alongside a Growth Score of C and Momentum Score of C. A Zacks Rank #3 can support holding an existing position, while the Zacks Style Scores indicate that valuation is the stronger part of the setup than growth or momentum. That combination fits a measured stance rather than a clear new-buy signal.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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