Why Town Sports (CLUB) Stock Is Gaining Today

NEW YORK (TheStreet) -- Shares of Town Sports International Holdings, Inc. (CLUB) are up 5.44% to $6.54 on heavy trading volume after the company announced the completed sale of its Manhattan property to Monty Two East 86th Street Associates for $85.5 million today.

The fitness club company said following the sale of its property it entered into a lease agreement under which it will continue to operate its current club at the location for 18 months.

Town Sports is the owner and operator of fitness club brands, New York Sports Clubs (NYSC), Boston Sports Clubs (BSC), Philadelphia Sports Clubs (PSC) and Washington Sports Clubs (WSC).

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Separately, TheStreet Ratings team rates TOWN SPORTS INTL HOLDINGS as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate TOWN SPORTS INTL HOLDINGS (CLUB) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, poor profit margins, weak operating cash flow, feeble growth in its earnings per share and generally disappointing historical performance in the stock itself."

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

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 114.8% when compared to the same quarter one year ago, falling from $6.20 million to -$0.92 million.
  • The gross profit margin for TOWN SPORTS INTL HOLDINGS is rather low; currently it is at 19.29%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -0.79% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to $9.83 million or 56.83% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • TOWN SPORTS INTL HOLDINGS has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Stable earnings per share over the past year indicate the company has managed its earnings and share float. We anticipate this stability to falter in the coming year and, in turn, the company to deliver lower earnings per share than prior full year. During the past fiscal year, TOWN SPORTS INTL HOLDINGS's EPS of $0.50 remained unchanged from the prior years' EPS of $0.50. For the next year, the market is expecting a contraction of 140.0% in earnings (-$0.20 versus $0.50).
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 47.85%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 116.00% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • You can view the full analysis from the report here: CLUB Ratings Report

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