A group assignment for the MBA Financial Management and Decision Making course (November 2025). We assessed the performance and financial health of Planet Fitness (NYSE: PLNT) from at least five years of data. The deliverables were a five-page Word report plus an Excel model in which every ratio traces back to its inputs through linked cells.
1. What is the problem statement?
Planet Fitness is the largest fitness franchisor in North America. It has about 2,655 US locations, more than 19 million members, and 93% of clubs owned by franchisees. It came through COVID-19 growing, but it also carries significant debt and negative shareholders' equity. The question was whether the company is financially healthy, and the story had to be backed by numbers, not opinion:
- The company: what it does, its five main competitors and their strengths and weaknesses, its unique value proposition, its customers and its ESG policy.
- The industry: general trends, and financial trends for both the industry and Planet Fitness.
- The numbers: at least eight performance ratios over five years, what each one says and why, and an overall verdict that links them into one story.
Planet Fitness sells to the roughly 80% of people who don't belong to a gym. The financial question is whether that growth is paid for sustainably.
2. What are the tradeoffs considered?
- Growth vs balance sheet. The profit and loss statement looks strong, but assets were financed mostly with debt, and equity and retained earnings stayed negative. We had to weigh healthy margins against leverage risk rather than judge on either one alone.
- Which ratios to trust. With negative shareholders' equity, return on equity turns negative and stops meaning what it usually does. We kept it in the table but read it as a sign of the capital structure, not of poor returns, and relied more on margins, ROA and turnover.
- Standard ratios vs industry metrics. Ratios alone miss how a gym business works. We added active members and revenue per member, taken from Planet Fitness press releases.
- Complete data vs reported data. The 2020 member count wasn't available, so we estimated it from the growth in later years and flagged it as an estimate.
- Who the verdict is for. The same numbers mean different things to different investors. We concluded differently for income investors than for long-term growth investors.
3. What is the solution proposed?
We started with the business. Planet Fitness competes on affordable access ($10–25 a month) and its "Judgment Free Zone", against Anytime Fitness, LA Fitness, 24 Hour Fitness, Gold's Gym and Crunch Fitness. Most of those charge around $40–60 a month; Crunch competes on budget prices with more amenities. Its customers are price-sensitive people, first-time gym users, casual exercisers and, increasingly, Gen Z: the High School Summer Pass attracted more than 3.7 million teens in 2024. On ESG, it was the first fitness brand to earn WELL Health-Safety certification in all locations.
The industry is growing. US fitness generated about $45–46 billion in 2024, with membership at a record 77 million Americans. High-value, low-price gyms led visit growth, and Planet Fitness holds about 30% of that segment, with 2,795 locations and 20.8 million members as of Q3 2025.
Then the numbers, built in Excel from the company's filings:
| Ratio | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| Gross profit margin | 45.89% | 53.81% | 50.60% | 52.05% | 52.05% |
| EBIT margin | 15.90% | 22.54% | 26.16% | 25.80% | 27.39% |
| Net profit margin | -3.74% | 7.86% | 11.79% | 13.72% | 14.75% |
| Return on assets | -0.03 | 0.09 | 0.14 | 0.15 | 0.15 |
| Return on invested capital | 1.10 | 1.55 | 0.55 | 0.33 | 0.35 |
| Cash turnover | 0.93 | 1.19 | 1.96 | 3.12 | 4.15 |
| Return on equity | 0.02 | -0.07 | -0.26 | -0.89 | -1.04 |
| Asset turnover | 0.23 | 0.30 | 0.38 | 0.37 | 0.39 |
- Profitability recovered and held. In 2024, of every dollar of revenue, 52 cents was gross profit, 27 cents was left after operating costs, and 15 cents was net income.
- Assets and cash are working harder. Asset turnover rose from 0.23 to 0.39, and each dollar of cash supported $4.15 of revenue in 2024, up from $0.93.
- Members grew and each one earns more. Active members grew from about 14 million (estimated) to 19.7 million, and revenue per member rose from $29.0 to $60.0.
- The balance sheet is the risk. Negative equity is why ROE is negative, and debt-to-assets and debt-to-equity were the weakest part of the picture.
Our verdict: revenue grew about 32% a year on average from 2021 to 2024, around 50% during the post-COVID recovery and about 12% in the last two years, and every margin held up. This is a company in a growth stage. The growth is funded by debt, so it needs to build cash reserves and turn retained earnings positive to avoid disruption. It's not the stock for investors who want regular dividends, but it suits long-term investors looking for capital gains in the health sector.
4. Any other improvements I could have done?
- Put leverage in the main table. Debt is the biggest risk, so debt-to-EBITDA, interest coverage and a liquidity ratio deserve a place among the core ratios, with the numbers shown, not just described.
- Replace ROE with a better measure. With negative equity, ROE is hard to interpret. I'd show return on invested capital with a clear definition and check why it swings so much between years.
- Benchmark against peers. The ratios show how Planet Fitness changed over time but not how it compares. Setting them against a listed peer such as Life Time would show whether a 15% net margin is strong for the industry.
- Use the reported 2020 member count. Replacing our estimate with the figure from the company's filings would make the revenue-per-member trend fully sourced.
- Add cash flow. Free cash flow and how the company spends it (debt service, buybacks, new clubs) would show whether growth pays for itself.
- Split franchise from company-owned clubs. The franchise and corporate-club segments have very different economics, and separating them would explain the margins better.