Is This Fitness Operator a Good Buy Now? – Town Sports International Holdings, Inc. (CLUB)

Peer comparison

At its current trading price, Town Sports International Holdings, Inc. (NASDAQ:CLUB)’s total market cap is around $223 million. The market is valuing the company at around 5 times EV/EBITDA. Compared to its bigger peer, Life Time Fitness, Inc. (NYSE:LTM), Town Sports seems to be much cheaper.

Life Time Fitness, the operator of more than a hundred centers under the LIFE TIME FITNESS and LIFE TIME ATHLETICSM brands in around 26 major markets in the U.S., is worth nearly $1.8 billion on the market. At a trading price of around $43 per share, the company is valued at 7.45 times EV/EBITDA. In terms of profitability, Life Time Fitness has a much higher operating margin at 18.5%, while the operating margin of Town Sports is only 9.37%.

Foolish bottom line

With a huge leverage, negative equity and a low operating margin, I do not think Town Sports could be a good fit in the long-term portfolio of value investors. Investors might buy Town Sports only to speculate on the expected improving operating performance in the first quarter of 2013.

The article Is This Fitness Operator a Good Buy Now? originally appeared on Fool.com and is written by Anh HOANG.

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