Why Planet Fitness Inc.'s Shares Popped 16% in May

What: Shares of Planet Fitness Inc. jumped 16.3% in May, according to data provided by S&P Global Market Intelligence, after the company reported strong earnings and outlook.

So what: First-quarter revenue was up 8.3% to $83.3 million and net income nearly doubled to $16.3 million, or $0.09 per share after accounting for non-controlling interests. Growth was driven by a 6.8% increase in same-store sales, augmented by 48 new franchise store openings in the period.

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Management also said that full-year revenue will be between $360 million and $370 million with adjusted earnings per share of $0.62 to $0.65.

Now what: The health and wellness craze is a big driver in Planet Fitness' growth and I don't see any reason the macro drivers won't continue. My concern is the single-digit growth rate and the lofty multiple investors are paying for shares. Even at the high end of guidance, shares trade for 27 times earnings, which is a high multiple for a company growing in the single digits. If shares pull back in coming months, it could be a buying opportunity. For now, though, I'll sit on the sidelines and wait for a better value in fitness.

The article Why Planet Fitness Inc.'s Shares Popped 16% in May originally appeared on Fool.com.

Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends Planet Fitness. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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