What happened

Shares of Nautilus (NYSE:NLS) gained 35.1% in value last month, according to data provided by S&P Global Market Intelligence. The maker of classic workout brands, including Bowflex, Schwinn, and Universal, continued to expand its product lineup that integrates its personalized JRNY digital fitness platform.

Following the launch of the Bowflex T7 and T10 treadmills in December, the company announced the release of the T22 treadmill and the Bowflex Max Trainer M9 cardio machine in January. 

A woman looking at her watch on her wrist while using a treadmill.

Image source: Getty Images.

So what

The rise of Peloton Interactive (NASDAQ:PTON) has caused established players like Nautilus to up their game. Nautilus reported a sales increase of 152% year over year in the third quarter, which the company credited to changing exercise habits during the COVID-19 pandemic. 

The investments in new products suggest a permanent shift in consumer behavior. Peloton announced the $420 million acquisition of Precor in December to expand its manufacturing capacity to meet rising demand for at-home fitness options. 

Likewise, Nautilus has increased production and supply chain capacity recently, including increasing production for bikes by as much as five times and expanding capacity for strength products by two to three times. 

Now what

Nautilus expects full-year 2020 sales to come in between $540 million to $565 million, representing growth of 78% over what was a challenging 2019 for the company. For earnings per share, analysts expect Nautilus to report $2.30, a significant improvement over the year-ago loss of $0.70. 

It's clear investors are not expecting the elevated demand to continue. Nautilus stock trades at a low P/E of 11.6 times expected 2020 earnings. That might seem attractive to value investors, but no one really knows for certain how long this demand trend will last once the pandemic is over, so the lower valuation could be warranted.

However, connected fitness platforms are integrating streaming content, such as music and even third-party services like Netflix to keep users engaged with their machines. Nautilus' JRNY platform uses machine learning that delivers personalized experiences for users and could prove stickier than investors realize. 

We'll know more when Nautilus reports fourth-quarter earnings results on Feb. 22. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.