PLNT, Planet Fitness

Will it survive?

• Can it pay its interest? 3.6×
  Adequate
  Operating income $395M ÷ interest expense $108M
  What this means

  Comfortable in a normal year, but below the margin of safety Graham looked for. Worth checking how stable the coverage has been across a full cycle.

• How heavy is the debt, net of cash? $2.0B · 5.1× operating profit
  Heavy net debt
  Cash $346M + ST investments $107M − debt $2.5B
  What this means

  Netting $452M of cash and short-term investments against $2.5B of debt leaves $2.0B owed, about 5.1× a year's operating profit (6.3× on the gross debt, before the cash). It also holds $88M in longer-dated marketable securities; counting those, it sits at $1.9B of net debt. Net debt is the leverage figure that matters: the cash is already set against the debt. Strategic or illiquid investments aren't counted here.

• How long is cash tied up? -31d
  Negative, funded by others
  DSO 19 + DIO 12 − DPO 63 days
  What this means

  Days cash is tied up between paying suppliers and collecting from customers. A negative cycle is a quiet moat: suppliers and customers fund the operation (Buffett's “float”), the company grows on other people's money.

Is it a good business?

• Return on invested capital 16%
  High through the cycle
  9-yr median, range 8%–31%; 17% latest = NOPAT $284M ÷ invested capital $1.7B
  Industry peers: median 8%
  What this means

  The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; a return below the cost of capital (~8%) erodes value as a business grows rather than building it — the test Buffett weighs most. The headline is the median of the last 9 years (it ran 17% most recently), so one peak or trough year doesn't set the verdict. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.

• Owner-earnings margin 19%
  High through the cycle
  10-yr median margin, range -5%–25%; latest $255M = operating cash $418M − maintenance capex $164M
  Industry peers: median 7%
  What this means

  What an owner could take out without starving the business: operating cash less the maintenance capital it must spend to hold its position — Buffett's owner earnings. That's 19% of revenue this year, a 19% median across 10 years. Treating stock comp as the real expense it is (less $12M of SBC) leaves $242M.

• Are earnings backed by cash? 1.91×
  Cash-backed
  Cash from ops $418M ÷ net income $219M

  In the filing’s words The filing leans on adjusted, non-GAAP earnings, but the GAAP profit is itself cash-backed — the adjustments are not papering over a cash shortfall here.

  What this means

  How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy, growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.

How is the cash used?

• Where do the earnings go? 263%
  Returned more than it generated
  Dividends + buybacks $670M ÷ Owner Earnings $255M
  What this means

  The company returned more than it generated: against $255M of Owner Earnings, $670M (263%) went back to shareholders, $169M dividends, $500M buybacks — the excess came from the balance sheet or borrowing, not the year's operations. Net of $12M stock comp, the real buyback was about $488M. Sustained, that pattern draws down cash or adds debt; the net-debt line above shows where it stands.

• Investing or harvesting? 1.05×
  Maintaining
  Capex $164M ÷ depreciation $156M
  What this means

  Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.

Graham’s defensive tests · 2 of 6 met

Graham’s numerical criteria for the defensive investor (The Intelligent Investor, ch. 14), run on the filings. A floor of safety, not a buy signal; many fine modern businesses fail his strictest liquidity rules by design.

• Adequate size Near
  Revenue ≥ $2B · $1.3B
  What this means

  Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.

• Strong liquidity Pass
  Current ratio ≥ 2× · 2.11×
  What this means

  Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.

• Conservative debt Miss
  Debt ≤ working capital · $2.5B vs $346M WC
  What this means

  Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.

• Earnings stability Near
  A profit every year (10-yr record) · 1 loss year
  What this means

  Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.

• Dividend record Miss
  Uninterrupted dividends · 1 of 10 yrs
  What this means

  An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.

• Earnings growth Pass
  Earnings +33% over the record · +271%
  What this means

  At least a third more earnings than a decade ago, averaging three years at each end. Net income (not per-share), so stock splits don't distort it, buybacks and dilution show up in the share-count line instead.

• Moderate price —
  P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price
  What this means

  Graham's valuation gate, the wall he kept between a sound business and a sound investment. Three-year average earnings are $2.22/share (latest year $2.76), the averaged base the calculator's gate runs on, and book value is $-6.08/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.

Durability & moat, 2016–2025

Whether the record’s returns held, and what the capital reinvested earned.

• Profitable years 9 of 10
  What this means

  Lost money in 1 year(s), look at what happened there before trusting the average.

• Return on capital ≥ 15% 5 of 10 yrs
  What this means

  A moat shows up as a high return on invested capital that holds year after year, not one good vintage.

• Operating margin 32% → 28% (3-yr avg ends)

  In the filing’s words The filing attributes gains to higher prices, but the margin in the record has not followed — the claim outruns the result here.

  What this means

  The recent-years average (28%) sits below the early years (32%), but the latest year (30%) is back near the early level: a cyclical trough dragging the window down, not a one-way slide. The through-cycle median is 27% — read it across the cycle, not on the dip.

• Reinvestment, incremental ROIC 13%
  What this means

  Reinvested capital came back at only a modest incremental return — near the cost of capital, where extra growth adds little per dollar. The record shows whether it is a soft stretch or a thinning moat.

• Owner earnings growth +10%/yr
  What this means

  Owner earnings grew about 10% a year over the record.

• Worst year 2020 · 14.7% op. margin
  What this means

  Stayed profitable even in its hardest year, the resilience that survives recessions.

• Dividend record paid
  What this means

  Paid a dividend in 1 of the years on record.