Planet Fitness (PLNT)

Inclusive gym franchise company (NYSE:PLNT) announced better-than-expected revenue in Q3 CY2025, with sales up 13% year on year to $330.3 million. Its non-GAAP profit of $0.80 per share was 8.2% above analysts’ consensus estimates.

Company Overview

Founded by two brothers who purchased a struggling gym, Planet Fitness (NYSE:PLNT) is a gym franchise that caters to casual fitness users by providing a friendly and inclusive atmosphere.

Leisure facilities companies often sell experiences rather than tangible products, and in the last decade-plus, consumers have slowly shifted their spending from "things" to "experiences". Leisure facilities seek to benefit but must innovate to do so because of the industry's high competition and capital intensity.

Competitors offering a traditional gym experience include Life Time (NYSE:LTH), LA Fitness, and Crunch Fitness while companies offering a more boutique, class-based approach include Xponential Fitness (NYSE:XPOF) and Orange Theory.

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Luckily, Planet Fitness’s sales grew at an impressive 22.6% compounded annual growth rate over the last five years. Its growth beat the average consumer discretionary company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Planet Fitness’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 9.9% over the last two years was well below its five-year trend. Note that COVID hurt Planet Fitness’s business in 2020 and part of 2021, and it bounced back in a big way thereafter.

We can better understand the company’s revenue dynamics by analyzing its same-store sales, which show how much revenue its established locations generate. Over the last two years, Planet Fitness’s same-store sales averaged 6.1% year-on-year growth. Because this number is lower than its revenue growth, we can see the opening of new locations is boosting the company’s top-line performance.

This quarter, Planet Fitness reported year-on-year revenue growth of 13%, and its $330.3 million of revenue exceeded Wall Street’s estimates by 2%.

Looking ahead, sell-side analysts expect revenue to grow 8.5% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and implies its products and services will face some demand challenges.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Planet Fitness’s operating margin has been trending up over the last 12 months and averaged 28.3% over the last two years. On top of that, its profitability was elite for a consumer discretionary business thanks to its efficient cost structure and economies of scale.

This quarter, Planet Fitness generated an operating margin profit margin of 32.4%, up 4.6 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Planet Fitness’s EPS grew at an astounding 58% compounded annual growth rate over the last five years, higher than its 22.6% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

In Q3, Planet Fitness reported adjusted EPS of $0.80, up from $0.64 in the same quarter last year. This print beat analysts’ estimates by 8.2%. Over the next 12 months, Wall Street expects Planet Fitness’s full-year EPS of $2.95 to grow 12.8%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Planet Fitness has shown robust cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company’s free cash flow margin averaged 16.4% over the last two years, quite impressive for a consumer discretionary business.

Planet Fitness’s free cash flow clocked in at $76.69 million in Q3, equivalent to a 23.2% margin. The company’s cash profitability regressed as it was 3.5 percentage points lower than in the same quarter last year, but it’s still above its two-year average. We wouldn’t read too much into this quarter’s decline because investment needs can be seasonal, causing short-term swings. Long-term trends trump temporary fluctuations.

Over the next year, analysts’ consensus estimates show they’re expecting Planet Fitness’s free cash flow margin of 15.7% for the last 12 months to remain the same.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Planet Fitness’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 15.3%, slightly better than typical consumer discretionary business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Planet Fitness’s ROIC averaged 4.4 percentage point decreases over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Planet Fitness reported $499.8 million of cash and $2.58 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $536.2 million of EBITDA over the last 12 months, we view Planet Fitness’s 3.9× net-debt-to-EBITDA ratio as safe. We also see its $39.81 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Planet Fitness narrowly top analysts’ same-store sales expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Overall, this print had some key positives. The stock traded up 6.9% to $98 immediately after reporting.

Updated: December 4, 2025 at 10:06 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

We cheer for all companies serving everyday consumers, but in the case of Planet Fitness, we’ll be cheering from the sidelines. For starters, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its spectacular EPS growth over the last five years shows its profits are trickling down to shareholders, the downside is its Forecasted free cash flow margin suggests the company will have more capital to invest or return to shareholders next year. On top of that, its same-store sales performance has disappointed.

Planet Fitness’s P/E ratio based on the next 12 months is 32.1x. This valuation tells us a lot of optimism is priced in - we think there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $128.94 on the company (compared to the current share price of $109.40).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.