NEW YORK (TheStreet) --Shares of Life Time Fitness Inc. (LTM) - Get Report are gaining by 12.80% to $65.05 in pre-market trading on Friday morning, following a report from the Wall Street Journal saying that the fitness center chain is in advanced talks with private equity bidders.

Bidding is expected to come to a close next week and has come down to two private equity groups. KLS Capital Partners LLC and another firm are partnering up on one bid, sources speaking with the Journal could not identify the second bidder.

Over the summer, Life Time Fitness said it would consider placing its property into a real estate investment trust, companies tend to pursue this move in order to reduce their tax bills, the Journal noted.

Last week, Life Time Fitness issued its 2014 results and said its board would continue to "review strategic alternatives" including the REIT conversion.

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It is unclear as to where that plan stands and whether or not, if Life Time Fitness were acquired, if one of the potential buyers would purchase both the business and the REIT, sources told the Journal.

Separately, TheStreet Ratings team rates LIFE TIME FITNESS INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate LIFE TIME FITNESS INC (LTM) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, expanding profit margins, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 7.7%. Since the same quarter one year prior, revenues slightly increased by 8.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • 36.33% is the gross profit margin for LIFE TIME FITNESS INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 7.09% trails the industry average.
  • Net operating cash flow has slightly increased to $71.40 million or 5.53% when compared to the same quarter last year. Despite an increase in cash flow, LIFE TIME FITNESS INC's cash flow growth rate is still lower than the industry average growth rate of 18.50%.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • You can view the full analysis from the report here: LTM Ratings Report