On Monday, Life Time Group Holdings Inc (NYSE:LTH) received a boost from Mizuho as the firm raised its price target on the company's shares to $29.00 from $23.00. The upgrade comes on the heels of a robust first quarter that surpassed expectations in both revenue and EBITDA, prompting an increase in the full-year 2024 guidance.
Life Time Group's recent performance has been buoyed by approximately $50 million in programming investments over the past two years. This has led to a significant improvement in member retention, which is currently about 10% higher than historical levels. Additionally, the company is experiencing growing wait lists and demonstrating strong pricing power.
The analyst from Mizuho also highlighted the anticipation of Life Time Group becoming free cash flow positive in the second quarter, following its growth investments. This milestone is considered an important step in the company's ongoing evolution.
In light of these developments, Mizuho has adjusted its forecast for the company's adjusted EBITDA for the fiscal year 2024 to $611 million, up from the previous estimate of $605 million. For fiscal year 2025, the estimate has been increased to $673 million from $666 million.
The new price target of $29 is based on rolling the valuation methodology forward from calendar year 2024 EBITDA to 2025 EBITDA and is pegged at approximately 17 times EBITDA, aligning with the multiples of peers in the healthy living sector.
InvestingPro Insights
Recent metrics from InvestingPro provide a deeper look into Life Time Group Holdings Inc's financial health and market performance. The company's market capitalization stands at $2.81 billion, reflecting its current market value. With a price-to-earnings (P/E) ratio of 28.86 based on the last twelve months as of Q4 2023, Life Time Group trades at a high earnings multiple, which could indicate investor confidence in its future growth or a premium for its market position. Despite this, the company's PEG ratio, which measures the P/E relative to growth, is exceptionally low at 0.01, suggesting that the company's earnings growth rate is significantly outpacing its P/E ratio.
From a revenue standpoint, Life Time Group has shown impressive growth with a 21.62% increase in the last twelve months as of Q4 2023, indicating strong business performance. The company also boasts a robust gross profit margin of 46.57%, showcasing its ability to maintain profitability despite costs.
InvestingPro Tips highlight that while Life Time Group operates with a significant debt burden and its short-term obligations exceed its liquid assets, analysts are optimistic about its profitability, with a prediction that the company will be profitable this year and noting that it has been profitable over the last twelve months. Additionally, three analysts have revised their earnings upwards for the upcoming period, reflecting a positive outlook on the company's financial prospects. It's worth noting that Life Time Group does not pay a dividend, which might be relevant for income-focused investors.
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