1-Star Stocks Poised to Plunge: Life Time Fitness?

Based on the aggregated intelligence of 125,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, fitness club operator Life Time Fitness (NYSE: LTM) has received the dreaded one-star ranking. Our data has shown that one-star stocks woefully lag the market average; conversely, five-star stocks outperform the S&P 500 by a significant margin.

by Brian D. Pacampara

Published on January 21, 2009 - 0 comments

With that in mind, let's take a closer look at Life Time Fitness' business and see what CAPS investors are saying about the stock right now.

Life Time Fitness facts

Headquarters (Founded)	Chanhassen, Minnesota (1990)
Market Cap	$575.82 million
Industry	Leisure Facilities
TTM Revenue	$746.77 million
Management	Founder/CEO Bahram Akradi COO Michael Gerend
Total Debt/Equity	101%
Competitors	Town Sports International (Nasdaq: CLUB), Bally Total Fitness
CAPS members bearish on LTM also bearish on	Centex (NYSE: CTX), Toll Brothers (NYSE: TOL)
CAPS members bullish on LTM also bullish on	Google (Nasdaq: GOOG), Altria (NYSE: MO), Goldman Sachs (NYSE: GS)

Sources: Capital IQ, a division of Standard & Poor's, and Motley Fool CAPS. TTM = trailing 12 months.

Over on CAPS, fully 178 of the 314 members who have rated Life Time Fitness -- some 57% -- believe the stock will underperform the S&P 500 going forward. These Fools include CAPS All-Star dexion10 and CashonDelivery.

Last month, dexion10 wrote that Life Time Fitness "is similar to Bally's Total Fitness, a gym that came back from bankruptcy and then filed for bankruptcy again in just 14 months. Gym memberships will be a casualty of the recession and [Life Time] runs high end gyms."

In a pitch from two weeks later, CashonDelivery, after taking the lead from stock whistleblower Citron Research, shared that same bearish stance:

After looking into the company, I agree it's terrible. They're generating most cash flow from sale-leaseback transactions, but they only have so many properties and I don't see the real estate market for huge fitness centers improving greatly, especially if the purchasing parties have concerns about the long-term viability of their new lease tenant. Coupled with declining utilization by members, this company is the walking dead.
Copyright © 2008 Universal Press Syndicate.

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Write to author: Brian D. Pacampara