It probably goes without saying that Peloton Interactive (PTON -5.01%) has dealt with more than its fair share of troubles over the past year. The disruptive exercise equipment maker benefited greatly from a pandemic-fueled surge, but when demand dried up, the company's financial situation deteriorated quickly. Once approaching a $50 billion market capitalization, the business is now worth under $4 billion. 

Instead of betting on Peloton to successfully execute a difficult turnaround, investors looking to allocate capital to the fitness industry should look at a safer, already profitable enterprise. Here's why Planet Fitness (PLNT -3.80%) might be a better fitness stock than Peloton in 2023. 

Cracking the fitness code 

Finding lasting success in the fitness industry is a difficult task for any business operating in the space. For starters, people are always interested in shiny new things. Further, no matter how committed we think we might be, humans are horrible at sticking to their diet and workout plans. This creates a challenging reality for executives. 

In Peloton's case, there's absolutely no doubt that consumers immediately fell in love with the initial product, the flagship Bike, as well as the on-demand classes. In each of the four years before fiscal 2022, there wasn't a single year that revenue didn't rise by at least 99% on an annual basis. At its peak, the average connected-fitness subscriber was completing 26 workouts per month on the platform. And churn was as low as 0.31% that quarter, which is extraordinary. 

But as we've seen, demand for Peloton's products has fallen dramatically, and the leadership team there is trying to turn things around. 

Brick-and-mortar gyms, however, have long been a staple in the industry. And in particular, Planet Fitness has bucked the usual trend of temporary success by cracking the fitness code. For only $10 a month, members get access to a massive gym full of cardio and strength-training equipment. And for $25 a month, the PF Black Card membership gives customers access to any nationwide Planet Fitness location, plus massage chairs, tanning beds, and various discounts and perks.  

It's incredibly hard to argue with this value proposition from the member's point of view. For a hardcore fitness enthusiast who doesn't need all the bells and whistles, Planet Fitness is a very attractive option. Even for someone who is new to exercising and just wants to learn, it's a great choice. In fact, Planet Fitness markets itself as "The Judgement Free Zone," encouraging inexperienced consumers to join. 

The business model works because the price is so low. This reduces friction for member sign-ups, and it lowers the probability that someone will cancel even if they barely visit a gym. The average Planet Fitness has 7,500 members but only has the capacity for 300 or so to be in a location at one time. Management's goal, it seems, is to grow the membership base but not have these customers come to work out all the time. It's a lucrative strategy. 

Unsurprisingly, Planet Fitness was severely impacted by the pandemic as its locations were forced to close temporarily. However, the company is back to posting strong growth. Through the first nine months of 2022, revenue increased 62% year over year, with diluted earnings per share (EPS) up 77%. As of Dec. 31, Planet Fitness counted 17 million members and 2,410 fitness centers.  

New Year's Resolution 

Planet Fitness CEO Chris Rondeau remains optimistic about the direction of the business in the new year. While shareholders will have to wait until next month for management's guidance for 2023, Wall Street is looking for strong growth. Consensus analyst estimates call for revenue and EPS to increase 15% and 39.5%, respectively, this year. Over the long term, the company plans to have 4,000 locations open across the U.S., plus international expansion, too. 

This all sounds wonderful from an investment perspective. However, Planet Fitness shares are currently trading at a price-to-earnings multiple of 94. Although I certainly view it as a better fitness stock to own than Peloton right now, this is a steep valuation to pay despite the company's bright prospects.