Forget Peloton: Here’s 1 Fitness Stock to Buy in 2024

Peloton Interactive (PTON 0.65%) seems to be getting all the attention these days, at least when it comes to the exercise industry. It thrived before and during the pandemic. But for the past few years, the business has been fighting for its survival.

The most recent financial update was applauded by investorsbecause maybe things will start moving in the right direction. If you are thinking of buying this consumer discretionary stock right now, though, think again. There is a better fitness stock to buy in 2024.

Perspective on the Peloton

Investors may be bullish on Peloton after its latest earnings report. Revenue of $643.6 million in the fiscal fourth quarter (ended June 30) was 0.2 percent higher than in the year-ago period. This could be a sign that things are stabilizing. Perhaps that’s what the market is thinking, given the stock’s huge rally.

But the one company struggles were widely publicized. Peloton continues to struggle to add subscribers while experiencing healthy sales growth and posting positive net income. Despite the stock trading at a cheap price-to-sales ratio of under 0.7, this is a business to avoid like the plague.

Buy Planet Fitness if you want industry exposure

The pandemic was a boon for Peloton, but it was a disaster for Planet Fitness (PLNT 0.18%)which had to temporarily close some of its locations to stop the spread of the coronavirus. Business was booming before the health crisis. Between those of the company initial public offering in August 2015 and the pre-COVID high in February 2020, the stock skyrocketed 450%. But since then, they’ve been on a volatile ride, down 7% (as of August 26).

Planet Fitness is on solid footing today. Revenue up 14.4% in 2023, up 8.7% system-wide same store sales growth and the opening of 165 new fitness centers. In the first six months of this year, sales increased by 7.9%. The company now has 19.7 million members and operates more than 2,600 locations that are primarily in the US

The new management team believes the runway for expansion is massive. “In terms of store growth, as shown by two third-party studies last year, we believe we can double our footprint domestically to around 5,000 locations, from the 4,000 target we set at our 2015 IPO ,” said CEO Colleen Keating. THE The Q2 2024 earnings call.

Because Planet Fitness operates a franchise model (only 259 are company-owned), it will be able to penetrate its market opportunity on outsider investment. Franchisees looking for a proven business idea will put money behind opening new Planet Fitness locations, similarly McDonald’s (NYSE: MCD) operate. This results in consistent profitability.

“The beauty of our asset-light franchise model is that it generates significant free cash flow,” CFO Tom Fitzgerald said on the call. In addition, Planet Fitness took in $84.3 million net income in the last six months. This is something that Peloton continues to strive to achieve.

Planet Fitness has proven that it can find lasting success in a tough industry. Consumers still seem to be very interested in signing up for gym memberships, especially ones that are so affordable. On the other hand, Peloton shows that it might just be another mode.

To be clear, Planet Fitness’ rating is not that convincing. It is trading at a price-to-earnings ratio of 45. This is almost double the multiple S&P 500.

Peloton is still an extremely risky stock to buy and own in my opinion. Planet Fitness isn’t perfect by any means, and its valuation doesn’t scream “bargain,” but it’s the best exercise business to own in the next few years.