The Bull Rankings scorecard — our quality-growth score is 62.9 / 100, built from three pillars scored 0–100: Quality 66, Growth 50, Value 76 (valuation is judged against sector peers). At today's price, our reverse-DCF read says the market is implicitly betting on free-cash-flow growth of about 5% a year next year, fading to 3% a year by year ten — a gauge of how much optimism is already in the stock.
The thesis
The stock has been a punching bag this year, far below its 52-week high, yet the numbers in the quarter ended 2026-06-30 still show a business that prints cash and grows revenue at a double-digit clip. Revenue grew 12.7% year over year in the latest fiscal year, while free cash flow clocked in at $262 million over the trailing twelve months. Our model gives the stock a 62.9/100 quality-growth score, with the strongest pillar being Value (76) and the weakest Growth (50). The value read is easy to see: an 18.1 P/E on a business that generates 16.9% profit margins is cheap for a franchise that can expand globally. The growth pillar flags caution because the model flags cyclical growth, a signal that the expansion isn’t immune to macro swings. The stock’s 52-week range—from $37.03 to $114.26—tells the same story: investors are pricing in a binary outcome, and the market has already decided the growth story is fragile.
What the business actually is
Planet Fitness sells memberships and franchises gyms. The Franchise segment licenses the brand to owners in the U.S., Puerto Rico, Canada, Panama, Mexico, and Australia, collecting royalties and fees. The Corporate-Owned Clubs segment runs gyms directly in the U.S., Canada, and Spain, while the Equipment segment sells gear to franchisees in the U.S., Canada, and Mexico. The Franchise segment is the growth engine—the company keeps adding new territories, and every new club lifts the royalty stream without the capital burden of owning the four walls. The Corporate-Owned Clubs act as a hedge and a showcase, proving the model works before it’s franchised. Equipment sales pad margins and lock franchisees into Planet Fitness-branded hardware, deepening the moat.
Why it can (or can't) keep compounding
The durability story hinges on the franchise flywheel and the brand’s ability to keep drawing in the “judgment-free” crowd. Profit margins held at 16.9% in the latest period, a figure that survives because the franchise model offloads real estate risk and operating costs to local owners. The moat isn’t tech or IP; it’s the brand’s cult-like following among cost-conscious gym-goers and the sticky, low-price memberships that survive recessions. Our model’s strongest pillar—Value—says the price is cheap against peers, but the weakest pillar—Growth—warns the expansion isn’t automatic. New clubs drive system growth, but the pace can slow if franchisees overextend or if consumer spending rolls over. The model’s cyclical growth signal is the canary: the next downturn will test whether the brand’s pricing power survives a pullback in discretionary spending.
The valuation question
The market has priced in only a gentle climb. The stock trades at 18.1 times trailing earnings, and the reverse DCF baked into our model agrees. Today’s price implies about 5% annual free-cash-flow growth (in year one, slowing to 3% a year by year ten), a target that sits below the 12.7% revenue growth reported in the latest fiscal year. That gap means the business could slow sharply and still clear the bar. The 52-week range tells the same tale: the stock has been cut in half, and the valuation now reflects much of the downside risk if the growth engine stalls. The market has simply decided to price in little growth for a business that still depends on foot traffic and discretionary spending.
The bear case
The most compelling skeptic’s argument is the balance sheet behind the negative return on equity (-38.8%). Planet Fitness is profitable, so the negative figure comes from negative shareholder equity, the legacy of borrowing to return cash to shareholders. That leverage leaves less room for error. A competitor could replicate the gym format, undercut Planet Fitness on price, or cherry-pick the best real estate and still leave the brand with a shrinking moat. The model’s cyclical growth signal is the second warning: if consumer spending weakens, the low-price memberships are the first discretionary line item to go. Watch the next quarterly same-store sales print; if it slips below 5%, the bear case gains traction.
What would change our mind
The thesis strengthens if revenue growth holds near the latest 12.7% and international franchising outpaces domestic slowdowns, though our model caps the Growth pillar at 50 for cyclical businesses. The Value pillar would need to hold near 76 while margins stay north of 16.9% and free cash flow keeps growing. Finally, if returns on capital stay high long enough for the model to flag “Durable high returns,” the durability case would firm up. Until then, the market is pricing a binary bet—either the brand’s pricing power survives the next downturn, or it doesn’t.