It’s easy to match the overall market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market – but in the process, they risk under-performance. Unfortunately the Planet Fitness, Inc. (NYSE:PLNT) share price slid 22% over twelve months. That contrasts poorly with the market return of 6.0%. On the bright side, the stock is actually up 1.9% in the last three years. More recently, the share price has dropped a further 12% in a month. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.
With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the unfortunate twelve months during which the Planet Fitness share price fell, it actually saw its earnings per share (EPS) improve by 100%. Of course, the situation might betray previous over-optimism about growth.
It’s surprising to see the share price fall so much, despite the improved EPS. So it’s well worth checking out some other metrics, too.
Planet Fitness’ revenue is actually up 40% over the last year. Since the fundamental metrics don’t readily explain the share price drop, there might be an opportunity if the market has overreacted.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
It’s good to see that there was some significant insider buying in the last three months. That’s a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free report showing analyst forecasts should help you form a view on Planet Fitness
A Different Perspective
While the broader market gained around 6.0% in the last year, Planet Fitness shareholders lost 22%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 3% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It’s always interesting to track share price performance over the longer term. But to understand Planet Fitness better, we need to consider many other factors. Even so, be aware that Planet Fitness is showing 2 warning signs in our investment analysis , you should know about…
Planet Fitness is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.