NEW YORK (
) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its notable return on equity, impressive record of earnings per share growth, compelling growth in net income, revenue growth and solid stock price performance. We feel these strengths outweigh the fact that the company has had generally poor debt management on most measures that we evaluated.
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Highlights from the ratings report include:
- Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, TOWN SPORTS INTL HOLDINGS's return on equity significantly exceeds that of both the industry average and the S&P 500.
- TOWN SPORTS INTL HOLDINGS reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, TOWN SPORTS INTL HOLDINGS turned its bottom line around by earning $0.27 versus -$0.01 in the prior year. This year, the market expects an improvement in earnings ($0.68 versus $0.27).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 151.1% when compared to the same quarter one year prior, rising from $1.53 million to $3.85 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 8.4%. Since the same quarter one year prior, revenues slightly increased by 5.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Powered by its strong earnings growth of 128.57% and other important driving factors, this stock has surged by 79.00% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
Town Sports International Holdings, Inc., together with its subsidiaries, owns and operates fitness clubs in the northeast and mid-Atlantic regions of the United States. The company has a P/E ratio of 35.2, equal to the average leisure industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Town Sports International has a market cap of $294 million and is part of the
industry. Shares are up 72.5% year to date as of the close of trading on Thursday.
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-- Written by a member of TheStreet Ratings Staff
TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.