In a December 2021 column, I pointed out that fears of the coronavirus were starting to ease sharply. In light of the latter development and the fact that the pandemic had made many Americans much more aware of the dangers of obesity, I wrote that “fitness stocks, particularly those that cater to exercise outside of the home, should do very well in 2022.” I’m even more upbeat on the sector now, and I definitely recommend that investors consider buying one or more of the best fitness stocks at this point.
My increased optimism about the sector stems from two main factors. First, obviously fears about the coronavirus have dropped tremendously, enabling most aspects of the lives of the vast majority of Americans to return to pre-pandemic norms. As a result, most consumers are going back to their pre-pandemic routines, including working out at gyms and participating in group yoga sessions.
And secondly, in the wake of the lockdowns imposed during the pandemic, there is tremendous, pent-up demand for “experiences” outside of homes. I believe that the best fitness stocks will get a big boost from that trend.
Meanwhile, I predict that many Americans will retain the increased awareness about the dangers of obesity that they internalized during the pandemic. The latter phenomenon, of course, will also be bullish for many fitness stocks.
| XPOF | Xponential Fitness | $15.75 |
| PLNT | Planet Fitness | $74.81 |
| LULU | Lululemon | $306.78 |
Best Fitness Stocks: Xponential Fitness (XPOF)
Xponential Fitness (NYSE:XPOF) specializes in building and operating expensive gyms that feature trendy types of exercise. Specifically, the company offers “pilates, barre, cycling, stretching, rowing, yoga, boxing, dancing, running, and functional training.” For the uninitiated, The New York Times says that pilates consists of “low-weight resistance training [that] can help our current bodies in important ways, strengthening the core muscles around the spine.” And Barre, according to Xponential: “is a full-body workout that transforms you physically and mentally. Our musically driven group classes focus on low-impact, high-intensity movements.”
The wealthy Americans who likely make up Xponential’s core customer base are not being nearly as negatively affected by inflation as poorer consumers. Meanwhile, the recovering stock market is likely to have a positive impact on spending by rich people in the U.S. and other countries. And Xpoential franchisees operate in 11 countries besides the U.S.
Given these points, I’m not surprised that Xponential’s financial results have been rebounding a great deal in recent quarters.
In the first quarter of 2022, for example, the company’s revenue jumped to $50.4 million, versus $29.1 million in Q1 of 2021 and $31.8 million in Q1 of 2020. Meanwhile, its gross profit in Q1 jumped to $32.2 million, up from $18.8 million during the same period of 2021 and $19 million in Q1 of 2020.
The trailing price-revenue ratio of XPOF stock is just 2.2. That’s very low for a company that appears to be rapidly growing.
Planet Fitness (PLNT)
As I noted in my last column on the best fitness stocks, Planet Fitness (NYSE:PLNT) last November reported that it was seeing increased interest in its gyms, in terms of both membership trends and utilization.
That trend appears to have continued into Q1, as its revenue climbed to $173 million, up from $100 million during the same period a year earlier and $118 million in Q1 of 2020. In the last 12 months that ended in March, its top line rose to $607 million, little changed from its 2019 sales of $639 million. The company is profitable, as its operating income over the 12 months that ended in March came in at $181 million, versus $158 million in all of 2021 and $235 million in the entirety of 2019.
In a June 15 note to investors, Randolph Konik, an analyst at financial-services firm Jeffries, predicted that Planet Fitness, which offers relatively low membership fees, would perform very well during a recession. That’s because “consumers will want less expensive and more convenient alternatives” during an economic downturn, Seeking Alpha explained. Konik kept a $115 price target and a “buy” rating on PLNT stock.
Best Fitness Stocks: Lululemon (LULU)
Lululemon’s (NASDAQ:LULU) niche is providing clothes used by yoga participants, and the yoga sector is booming. As evidence of that assertion, a report posted recently by Research and Markets estimated that:
The global yoga mat market is expected to grow from $10.76 billion in 2021 to $11.37 billion in 2022 at a compound annual growth rate (CAGR) of 5.7%. The market is expected to grow to $14.36 billion in 2026 at a compound annual growth rate (CAGR) of 6%.
Anecdotally, I’ve heard many more of my friends and acquaintances, both male and female, talk about attending yoga classes than ever before.
In light of these points, it doesn’t surprise me to learn that Lululemon’s results continue to rapidly improve. In the year that ended in January, the company’s top line came in at $6.26 billion, up from $4.4 billion during the previous year and $3.29 billion during its fiscal year that finished in Feb. 2019. Meanwhile, its operating income climbed to $1.37 billion, versus $813 million last year and $706 million in the year that ended in Feb. 2019.
On July 21, Keybanc began coverage of LULU stock with an “overweight” rating, calling the apparel maker” a best-in-class example of effective omnichannel execution.”
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.