Life Time Group Holdings, Inc. Just Reported A Surprise Profit And Analysts Updated Their Estimates

Shareholders will be ecstatic, with their stake up 33% over the past week following Life Time Group Holdings, Inc.'s (NYSE:LTH) latest third-quarter results. It looks like a credible result overall - although revenues of US$496m were what the analysts expected, Life Time Group Holdings surprised by delivering a statutory profit of US$0.12 per share, instead of the previously forecast loss. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Our analysis indicates that LTH is potentially undervalued!

Taking into account the latest results, the current consensus from Life Time Group Holdings' ten analysts is for revenues of US$2.24b in 2023, which would reflect a sizeable 31% increase on its sales over the past 12 months. Life Time Group Holdings is also expected to turn profitable, with statutory earnings of US$0.12 per share. In the lead-up to this report, the analysts had been modelling revenues of US$2.26b and earnings per share (EPS) of US$0.19 in 2023. So there's definitely been a decline in sentiment after the latest results, noting the large cut to new EPS forecasts.

The average price target fell 9.6% to US$16.90, with reduced earnings forecasts clearly tied to a lower valuation estimate. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Life Time Group Holdings at US$33.00 per share, while the most bearish prices it at US$12.00. We would probably assign less value to the analyst forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Life Time Group Holdings' past performance and to peers in the same industry. The analysts are definitely expecting Life Time Group Holdings' growth to accelerate, with the forecast 24% annualised growth to the end of 2023 ranking favourably alongside historical growth of 3.6% per annum over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 13% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Life Time Group Holdings to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Life Time Group Holdings analysts - going out to 2024, and you can see them free on our platform here.

Even so, be aware that Life Time Group Holdings is showing 1 warning sign in our investment analysis , you should know about...

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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.