PLNT – Expectations for PLNT are relatively muted, implying that, despite the potential for near-term headwinds, long-term equity upside remains warranted

• Planet Fitness (PLNT:USA) currently trades at historical highs relative to UAFRS-based (Uniform) Earnings, with a 34.7x Uniform P/E. However, even at these levels, the market is pricing in expectations for Uniform ROA to remain relatively flat, with lower-than-average Uniform Asset growth. Although negative management sentiment suggests the potential for near-term headwinds, market expectations are too muted in the context of the firm’s historical performance and strong fundamental tailwinds, suggesting long-term equity upside remains warranted
• Specifically, management may have concerns about their ability to sustain franchise store growth and capitalize on new growth opportunities. Additionally, they may lack confidence in their ability to sustain operating income, equipment sales, and store acquisition growth, and may be downplaying concerns about continued equipment commission and franchise fee declines. Moreover, they may be concerned about their ability to utilize segmentation study data to personalize member experience and fitness services, and may be overstating their app’s fitness functionality and technology initiative progress
• Although management’s concerns about franchise growth rates, commissions and fees, and membership experience suggest the potential for near-term headwinds, market expectations for Uniform ROA compression still appear too muted. As such, multiple expansion and equity upside continue to be warranted in the long-term