Planet Fitness' (NYSE:PLNT) five-year earnings growth trails the 27% YoY shareholder returns

It hasn't been the best quarter for Planet Fitness, Inc. (NYSE:PLNT) shareholders, since the share price has fallen 17% in that time. But that doesn't change the fact that the returns over the last five years have been very strong. We think most investors would be happy with the 226% return, over that period. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Ultimately business performance will determine whether the stock price continues the positive long term trend.

Since the stock has added US$414m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Planet Fitness

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 five years of share price growth, Planet Fitness moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Planet Fitness has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

A Different Perspective

The total return of 11% received by Planet Fitness shareholders over the last year isn't far from the market return of -10%. Longer term investors wouldn't be so upset, since they would have made 27%, each year, over five years. If the stock price has been impacted by changing sentiment, rather than deteriorating business conditions, it could spell opportunity. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Planet Fitness has 5 warning signs (and 2 which are potentially serious) we think you should know about.

We will like Planet Fitness better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.