Planet Fitness Inc (PLNT)

Short-term

Turnover ratios

Based on the activity ratios provided for Planet Fitness Inc, we can analyze the company's operational efficiency and effectiveness in managing its resources:

1. Inventory Turnover: Planet Fitness Inc's inventory turnover has fluctuated over the years, ranging from a high of 408.82 in December 2020 to a low of 27.38 in September 2023. A high inventory turnover indicates that the company is selling its inventory quickly, which is generally positive. However, significant fluctuations in inventory turnover may indicate changes in demand or inventory management practices that need to be addressed.

2. Receivables Turnover: The receivables turnover ratio shows how efficiently the company is collecting on its credit sales. Planet Fitness Inc's receivables turnover has varied, with peaks and troughs observed over the years. Higher turnover is favorable as it indicates a faster collection of receivables, improving cash flow. The company should strive to maintain a consistent and efficient collection process.

3. Payables Turnover: The payables turnover ratio measures how quickly the company is paying its suppliers. Planet Fitness Inc's payables turnover has shown fluctuations, with some periods of higher turnover. A higher turnover may suggest that the company is managing its payables effectively. However, it is important to monitor this ratio to ensure timely payments without straining liquidity.

4. Working Capital Turnover: The working capital turnover ratio assesses how efficiently the company is utilizing its working capital to generate sales revenue. Planet Fitness Inc's working capital turnover has generally increased over time, indicating improved efficiency in using working capital to generate sales. A higher turnover ratio signifies better utilization of resources and potential for increased profitability.

Overall, analyzing these activity ratios provides insights into Planet Fitness Inc's operational performance and management of key resources. The company should continue to monitor and optimize these ratios to enhance operational efficiency, financial health, and ultimately, shareholder value.

---

Average number of days

Based on the provided data, let's analyze the activity ratios of Planet Fitness Inc:

1. Days of Inventory on Hand (DOH):
- The DOH measures how many days a company takes to convert its inventory into sales.
- Planet Fitness Inc's DOH fluctuated over the years, ranging from a low of 0.89 days in December 2020 to a high of 13.33 days in September 2023.
- Generally, a lower DOH indicates efficient inventory management, but a very low DOH may suggest inventory shortages or disruptions in the supply chain.

2. Days of Sales Outstanding (DSO):
- DSO indicates the average number of days it takes for the company to collect revenue after a sale is made.
- Planet Fitness Inc's DSO varied between 12.28 days in March 2023 to 40.78 days in December 2020.
- A lower DSO is preferable as it indicates faster cash conversion, efficiency in collecting receivables, and better liquidity.

3. Number of Days of Payables:
- This ratio shows how long a company takes to pay its suppliers.
- The number of days of payables for Planet Fitness Inc ranged from 26.31 days in September 2022 to 75.57 days in March 2020.
- A longer period for payables may indicate effective working capital management by extending payment terms, but excessively long payables may strain relationships with suppliers.

In summary, analyzing these activity ratios provides insight into Planet Fitness Inc's operational efficiency, inventory management, receivables collection, and supplier payment practices. Monitoring and optimizing these ratios can help the company enhance its working capital management and overall financial health.

---

Long-term

Based on the provided data for Planet Fitness Inc, let's discuss the long-term activity ratios:

1. Fixed Asset Turnover:
- The fixed asset turnover ratio measures how efficiently the company utilizes its fixed assets to generate sales. A higher ratio indicates better efficiency.
- Planet Fitness Inc's fixed asset turnover has decreased gradually from 4.29 in March 2020 to 2.74 in December 2024. This decline suggests a decrease in the efficiency of generating sales from fixed assets over the period.
- A sudden improvement from 1.16 in March 2022 to 2.53 in December 2023 followed by a reasonable stabilization indicates some strategic changes that enhanced asset utilization.

2. Total Asset Turnover:
- The total asset turnover ratio shows how well the company uses its total assets to generate revenue. A higher ratio implies effective asset utilization.
- Planet Fitness Inc's total asset turnover remained relatively stable around 0.3 in the earlier years but started increasing gradually to 0.38 by December 2024. This improvement suggests a positive trend in using total assets efficiently to generate sales.
- The consistent growth in the total asset turnover ratio reflects the company's effective management of both fixed and current assets to drive revenue growth over the long term.

In conclusion, while the fixed asset turnover ratio showed some fluctuations, the total asset turnover ratio demonstrated a positive trend over the years, indicating improving efficiency in utilizing both fixed and total assets to generate sales for Planet Fitness Inc. The company's focus on optimizing asset utilization could be contributing to its long-term financial performance.