Life Time: A Small-Cap Bet on Stickiness, Scale, and Pricing Power
A wellness model with hard moat and meaningful white space. By Benjamin Tan.
An abridged version of this write-up first appeared on Yahoo Finance as a featured community analysis.
Peter Lynch’s core advice is simple: invest in what you truly understand. I have been a Life Time member since November 2024—using not just the gym, but also the spa, daycare, and café—and that proximity prompted deeper due diligence into the company as an investment opportunity. At the same time, I recognize the risks and potential for biases: LTH 0.00%↑ remains a small-cap company, with a market value under $10 billion, and my favorable experience as a member may color my investor perspective. Nevertheless, I believe LTH 0.00%↑ can more than double its current share price of approximately $27 within the next 2-3 years, and I have taken a small position to create alpha in my Traditional IRA.
Hard Moat and Meaningful White Space
LTH 0.00%↑ operates 184 centers across ~30 US states and one Canadian province. The company has explicitly guided for 10 to 12 new openings per year—a measured pace that aligns with its premium positioning and capital discipline. Management has not set a long-term unit count target; however, investor materials suggest that meaningful whitespace remains in both urban and affluent suburban markets, particularly through mall integrations and residential developments. With an average club size of approximately 100,000 square feet, LTH 0.00%↑ is building a national wellness infrastructure that cannot be easily replicated.
Inclusive Demographics, Pricing Power
While many gyms target specific groups or provide generic experiences, LTH 0.00%↑ differentiates itself. It is more than simply a fitness facility; it serves as a lifestyle community that welcomes families with young children, working professionals, retirees, and individuals of all ages, genders, and sexual orientations. The diversity of its members becomes clear during my visits to the local club.
This inclusive appeal supports two of Life Time’s most durable advantages: member stickiness and pricing power. On the Q2 2025 earnings call, management noted that visits and retention were at all-time highs, prompting a deliberate focus on raising prices and ancillary revenues rather than expanding membership. That level of strategic restraint is rare in fitness retail and underscores the strength of Life Time’s value proposition.
Optimization and Greater Return on Investment
Financially, LTH 0.00%↑ is entering a more disciplined phase. Revenue for Q2 2025 increased to $762 million, up 14% year over year. Net income rose by 37%, and free cash flow turned positive for the fifth straight quarter. These improvements are deliberate. The company is intentionally shifting its focus from rapid expansion to margin growth, cash generation, and debt reduction.
In contrast, PLNT 0.00%↑, which relies heavily on a franchise model, reported $341 million in revenue for the second quarter of 2025, representing a 13% increase. Life Time's adjusted EBITDA was $211 million, surpassing Planet Fitness's $148 million. Membership numbers were 849,643 for Life Time and 21 million for Planet Fitness.
That gap reflects two very different business models: PLNT 0.00%↑ focuses on unit growth and franchise royalties, while LTH 0.00%↑ emphasizes a more personalized, asset-intensive platform with greater monetization opportunities. In June 2025, Life Time signed a $150 million sale-leaseback deal, converting real estate into capital without losing control. Another $100 million in sale-leaseback transactions are expected in the second half of the year. This is a company trading scale for sustainability, doing so on its own terms.
What Could Go Wrong and Valuation
LTH 0.00%↑ is dependent on retaining affluent members across economic cycles, and its business model carries significant operating leverage. Any revenue slowdown or cost mismatch could disproportionately compress margins. Growth initiatives in digital and branded products are still relatively unproven. Momentum is real, but execution must remain tight.
Still, at the current valuation, the risks might be justified by the potential upside. Management expects 2025 revenue to grow by around 14%, reaching $3.0 billion. Adjusted EBITDA is forecasted to increase by 20%, and net income by over 86%—showing that margin expansion is now a key focus. LTH 0.00%↑ has also reduced its net debt leverage from 3.0x to 1.8x over the past year, indicating disciplined cash flow management. Based on the company's 2025 adjusted EBITDA guidance, its enterprise valuation (with a $27 per share price) is about 12 times. In comparison, PLNT 0.00%↑ trades at roughly 20 times (at $105 per share).
If LTH 0.00%↑ continues to grow revenues in double digits while further expanding margins, more than doubling its share price is plausible.
Final Thought
LTH 0.00%↑ is not trying to be everything to everyone. It is building a high-end, high-engagement wellness platform with a long runway for monetization and margin improvement. While the stock remains overlooked relative to its scale, pricing power, and member retention, the underlying business is gaining operating leverage with each passing quarter. For investors seeking exposure to health, fitness, and real estate in one disciplined vehicle, LTH 0.00%↑ offers asymmetric upside.
Follow me on X.com (formerly Twitter) @ConsumeOwnTech and Yahoo Finance. My book, Suit Yourself: A Portfolio Strategy for Every Personality Type, blends Enneagram psychology, pop culture, and behavioral finance to offer a personalized roadmap to investing. Learn more at my author page or preorder the book on Amazon.
Subscribe to Consume Your Own Tech Investing FOR FREE to receive a welcome email with the following:
My Top 10 high-conviction portfolio positions, combining value and growth stocks
Book recommendations in investing, consumer, and tech sectors
Monthly articles delivered straight to your inbox