Is Planet Health a Good Purchase in 2021?

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There is a huge physical fitness trend going on in the United States, and it might seem like a stationary gym operator might be a great way to do it once the country goes back to normal. In this Fool Live video clip, however recorded on June 4th, Chief Growth Officer Anand Chokkavelu explains why a panel of Fool analysts was rated Planet Fitness (NYSE: PLNT) in last place among some of the most famous fitness stocks.

Anand Chokkavelu: Number 7 is actually a tie, but let’s go to Planet Fitness first. Oh God. Unfortunately, I have both of the first two so I’ll try to go through these pretty quickly so the others have some chance to chat. But I have the worst rated.

Jason Hall: You can do that, Anand, I trust you.

Chokkavelu: Me too. Then we have a lot of time for you to talk. Planet Fitness is tied for seventh or sixth place I think. For those who aren’t familiar with it, Planet Fitness is a super affordable, easy-to-cancel gym that sets itself apart from the competition. For example, it’s very inclusive for all fitness levels. It actually did amazingly well during the pandemic, at least on a relative basis. While competitors like Gold’s Gym filed for bankruptcy, Planet Fitness’ low-cost business model, including a large percentage of franchisees, saved it. Add to this innovation around virtual options, and now it has the ability to grow at the expense of those ailing competitors or at the expense of competitors with plans that cost around $ 10-20 per month. You can easily see how it can be an addition to something like one Peloton or an occasional high-end class elsewhere, while some of these others maybe, maybe not. With more than 2,000 fitness studios, the number is set to almost double to 4,000 locations in the USA. Virtually all of them in the US now, so there is some international potential as well. In numerical terms, it currently has a market capital of $ 6-7 billion and a gross margin of 58%. Thanks to this franchise part of the business that has extremely good margins as it is poor in capital and then a decent amount of debt that is usually pretty easy to cover but has been tighter due to losses and negative cash flows during the pandemic times. But all in all, not too bad for our past stocks. I think, at least for me, I like it.

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