In the past 12 months, the S&P 500 index has generated a total return of 13% (as of May 21). This is a wonderful outcome, despite there being a ton of volatility in the past three months, thanks to uncertainty about trade policies and the overall economy.
But some businesses have fared much better. There's one growth stock that has handily outperformed the broader index, as it's up 61% in the past year. Continue reading to learn what this company is and whether or not it should be in your portfolio.
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Solid Q1 numbers
Investors should become familiar with Planet Fitness (PLNT 0.53%). The low-cost fitness center chain reported solid financial results for the three-month period that ended March 31 (Q1 2025). Revenue increased 11.5% to a total of $277 million. The top-line figure was driven by the opening of 19 net new locations, bringing the total to 2,741. Besides the U.S., Planet Fitness has a presence in Canada, Panama, Mexico, Australia, and Spain.
Further supporting the revenue gain was same-store sales (SSS) growth of 6.1%. This is a key performance metric for any retail-based business. It demonstrates increasing productivity from existing locations. To see a positive figure here is definitely an encouraging sign.
Planet Fitness' management team remains optimistic in the face of ongoing macro uncertainty. They expect SSS to rise between 5% and 6% in 2025, with revenue to increase by 10%. The plan is to open 160 to 170 new locations this year.
Large growth opportunity
Planet Fitness made headlines a year ago when it decided to increase the price of its basic membership option from $10, where it had stood for 26 years, to $15 per month. Even at the higher monthly rate, it's difficult to argue that the business doesn't offer customers a very compelling value proposition. This is demonstrated by Planet Fitness adding a notable 900,000 new members in Q1, now bringing the total to a whopping 20.6 million. This huge figure clearly highlights an incredible product-market fit.
There are fears about a potential economic downturn on the horizon in the not-too-distant future. The fact that Planet Fitness' cost is so low could help it minimize membership churn better than other more expensive rivals might deal with.
Looking ahead, there appears to still be a sizable growth runway for Planet Fitness to tackle. Executives believe that in the U.S., the business could one day get to 5,000 fitness clubs. At that level, revenue and earnings would surely be much higher than they are today.
Operating a franchise model helps, where only 10% of the company's locations are owned directly by Planet Fitness. This puts the capital requirements onto third-party franchisee partners, which helps fuel growth for the business in an asset-light way. Franchisees get access to the brand name, operational guidance, and marketing support in an effort to reap the financial gains.
This setup has helped the company's profitability. In the past decade, Planet Fitness has reported an average operating margin of 26%.
Is it time to buy the stock?
Shares of Planet Fitness have been on an absolute tear in the past 12 months. Thanks to such a stellar performance that significantly outperforms the S&P 500, the valuation isn't that attractive, though.
As of this writing, investors can scoop up the stock at a forward price-to-earnings (P/E) ratio of 35.6. That looks expensive, in my opinion, especially when you consider that consensus forecasts call for earnings per share to rise at an annualized pace of about 15% between 2024 and 2027.
The valuation definitely isn't cheap. This is a key reason why I don't believe the stock is a no-brainer buy right now. However, this might be the best way to gain exposure to the fitness industry. Interested investors might want to consider dollar-cost averaging into the stock if they're so bullish.
