Investing can be hard but the potential fo an individual stock to pay off big time inspires us. Mistakes are inevitable, but a single top stock pick can cover any losses, and so much more. Take, for example, the Planet Fitness, Inc. (NYSE:PLNT) share price, which skyrocketed 355% over three years. On top of that, the share price is up 23% in about a quarter. But this move may well have been assisted by the reasonably buoyant market (up 12% in 90 days).
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Planet Fitness was able to grow its EPS at 107% per year over three years, sending the share price higher. This EPS growth is higher than the 66% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat. Of course, with a P/E ratio of 70.86, the market remains optimistic.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Planet Fitness has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Planet Fitness’s financial health with this free report on its balance sheet.
What about the Total Shareholder Return (TSR)?
We’d be remiss not to mention the difference between Planet Fitness’s total shareholder return (TSR) and its share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Planet Fitness hasn’t been paying dividends, but its TSR of 417% exceeds its share price return of 355%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
We’re pleased to report that Planet Fitness rewarded shareholders with a total shareholder return of 82% over the last year. That’s better than the annualized TSR of 73% over the last three years. These improved returns may hint at some real business momentum, implying that now could be a great time to delve deeper. If you would like to research Planet Fitness in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.