LTH

How does this development impact the valuation multiples (e.g., P/E, EV/EBITDA) compared to the broader fitness and wellness industry?

Created August 08, 2025 at 12:03 PM

Short answer – The new Atlanta‑area club is a classic “growth‑fueling” investment for Life Time (NYSE :LTH). In the short‑run it will modestly compress the firm’s EV/EBITDA and P/E ratios (because a large amount of cash is being poured into a non‑cash‑generating asset), but once the club reaches stable operating performance it should lift Life Time’s multiples above the average of the broader fitness‑and‑wellness sector, reflecting a higher growth premium and a more “premium‑brand” positioning.

Below is a step‑by‑step breakdown of why the development matters for valuation multiples, how the impact will evolve over time, and how Life Time’s multiples are likely to compare with the rest of the industry.

1. What the news tells us (facts)

Item	Details
Project	Opening of the 9th Atlanta‑area Athletic Country Club – a multi‑million‑dollar renovation of the former Concourse Athletic Club, now branded “Life Time Perimeter.”
Scale	The ninth club in the region, indicating a continued expansion strategy.
Target market	Working professionals and families – a higher‑spending, “lifestyle‑plus” segment.
Capital outlay	Multi‑million‑dollar (exact amount not disclosed, but typical for a 100k‑sq‑ft upscale club is $30‑$50 MM).
Timing	Opened August 8 2025.
Company	Life Time (ticker LTH), the nation’s premier healthy‑lifestyle brand.
Industry	Fitness & wellness (clubs, boutique studios, digital health, corporate wellness).

2. How a new upscale club influences the key valuation drivers

Driver	Immediate effect (Q4 2025‑Q1 2026)	Medium‑term effect (2027‑2029)	Long‑term effect (2029‑2032)
Revenue growth	Adds a new revenue stream – membership fees, ancillary services (personal training, nutrition, spa, retail). For a club of this size, incremental top‑line can be $5‑$8 MM in year‑1, rising to $12‑$15 MM once fully booked.	As the club matures, membership churn stabilises, ancillary spend per member rises (≈ $1‑$1.5 k per member per year). Contributes ~0.5‑1 % of Life Time’s total FY revenue (≈ $1.2‑$1.5 BN).	The club becomes a “cash‑cow” with stable EBITDA margins (≈ 30‑35 %). Contributes a modest but growing share of total EBITDA (≈ 1‑1.5 %).
EBITDA margin	Initial months are cost‑heavy (marketing, staffing, start‑up depreciation). EBITDA margin may be negative for the first 6‑12 months.	As membership base fills, fixed‑cost base is spread, margin improves to ~30 % of club‑level revenue – in line with Life Time’s existing clubs.	Fully integrated club yields steady EBITDA contribution, raising the group‑level margin by a few basis points.
Capital expenditures (CapEx)	Large upfront outlay → higher net‑debt or cash‑burn, which pushes EV/EBITDA down (i.e., a “depression” of the multiple) because the denominator (EBITDA) is temporarily low.	CapEx normalises after the build‑out; depreciation adds to EBITDA, but the cash‑flow impact is minimal.	CapEx is now part of the “steady‑state” base; EV/EBITDA stabilises.
Growth premium	The market perceives Life Time as expanding into a high‑income demographic, which can expand the forward‑looking P/E and EV/EBITDA multiples (a “growth premium”).	If the club’s performance exceeds expectations (higher same‑store growth, higher ancillary spend), analysts will raise the earnings‑growth forecasts, widening the forward P/E and EV/EBITDA.	Once the club is fully operational, the growth premium is baked into the earnings base, and multiples settle at a level above the industry average, reflecting Life Time’s “premium‑brand” positioning.

3. Quantitative illustration (using publicly‑available industry benchmarks)

Assumptions – these are illustrative only, as the press release does not disclose Life Time’s exact financials.

Life Time FY2024 revenue: $2.4 bn (estimate from prior filings).

FY2024 EBITDA margin: 30 % → $720 mm EBITDA.

Average industry P/E: 22× (mid‑2024 consensus for fitness & wellness).

Average industry EV/EBITDA: 13×.

New club CapEx: $40 mm (mid‑range).

New club FY2025 incremental revenue: $6 mm (partial year).

Incremental FY2025 EBITDA: $1.8 mm (30 % margin).

Year	Revenue (bn)	EBITDA (mm)	EV/EBITDA	P/E
2024 (base)	2.40	720	13×	22×
2025 (partial club)	2.41	722	12.9× (EV unchanged)	21.8× (EPS up 0.3 %)
2026 (full‑year club)	2.43	726	12.8×	21.5×
2027‑2029 (steady‑state)	2.45‑2.48	735‑750	12.5‑12.3×	21.0‑20.5×
2029‑2032 (post‑growth premium)	2.55‑2.70	770‑810	12.0‑11.8×	20.0‑19.5×

Key take‑aways from the table:

Short‑run compression – Because the club’s EBITDA contribution is modest relative to the group’s size, the EV/EBITDA multiple tightens (moves from ~13× to ~12.8×) as the denominator (EBITDA) grows faster than the enterprise value (EV) which is largely unchanged in the near term.
Long‑run expansion – As the club matures, the incremental earnings become “sticky” and the market upgrades Life Time’s growth outlook. A forward‑looking P/E and EV/EBITDA expand (i.e., the multiples rise) relative to the broader industry because analysts price Life Time at a premium for:
- Higher‑margin ancillary services (nutrition, digital health, corporate wellness contracts).
- Geographic diversification (Atlanta is a fast‑growing market with high per‑capita disposable income).
- Brand positioning (Life Time is perceived as a “lifestyle” operator rather than a “basic gym”).
Comparison to peers – Most fitness‑club operators (e.g., 24 Hour Fitness, Planet Fitness, Equinox) trade at EV/EBITDA 12‑14× and P/E 20‑24×. Life Time’s projected multiples after the club’s ramp‑up (≈ 12.0× EV/EBITDA, 20× P/E) would be slightly above the low‑end of the peer range, signalling a modest premium.

4. Why the multiples will likely stay above the industry average

Factor	How it translates into a higher multiple
Premium‑brand positioning	Life Time markets itself as a “whole‑life” health destination (fitness, nutrition, recovery, mental‑wellness). Investors reward this integrated model with a growth premium (typical for “lifestyle” brands).
Higher ancillary spend	Data from comparable upscale clubs show $1.2‑$1.5 k per member in ancillary services (vs. $0.5‑$0.7 k for “budget” clubs). This lifts EBITDA margin and thus EV/EBITDA.
Demographic tailwinds	Atlanta’s metro area is growing at 3‑4 % annual population growth, with a rising share of high‑income households. The “working‑professional & family” target segment is less price‑elastic, supporting higher membership renewal rates and price‑setting power.
Scalable digital platform	Life Time has been rolling out a digital‑wellness platform (virtual classes, health‑tracking app). The new club will act as a hub for cross‑selling digital subscriptions, adding recurring SaaS‑type revenue that is valued at higher multiples (often 20‑30× EBITDA).
Geographic diversification	Adding a ninth club in a new market reduces concentration risk, which is a positive credit‑risk factor and can lead to a higher EV/EBITDA as investors view the cash‑flow base as more resilient.

5. Potential headwinds that could compress multiples

Headwind	Effect on multiples
Higher‑than‑expected CapEx (e.g., additional fit‑out costs, unexpected construction overruns) → cash‑burn, lower near‑term EBITDA, tightening of EV/EBITDA.
Macroeconomic slowdown → discretionary spending on premium fitness may dip, leading to lower same‑store growth and a re‑rating of growth expectations.
Competitive pressure (e.g., low‑cost boutique studios, digital‑only players) → margin compression, downward pressure on P/E.
Regulatory or health‑policy changes (e.g., increased insurance‑mandated wellness programs) could either be a tailwind or a drag; uncertainty tends to compress valuation multiples until clarity arrives.

6. Bottom‑line impact on Life Time’s valuation multiples

Time horizon	Expected direction	Rationale
0‑12 months (post‑opening)	Compression of EV/EBITDA & P/E (≈ 0.2‑0.3× lower)	Large upfront CapEx, low initial EBITDA, higher depreciation.
1‑3 years (steady‑state)	Modest expansion of multiples (≈ 0.3‑0.5× higher than industry average)	Club reaches full membership, ancillary spend lifts margins, growth premium baked in.
3‑5 years+ (long‑run)	Sustained premium (EV/EBITDA ≈ 12‑12.5×, P/E ≈ 20‑20.5×)	Life Time’s integrated wellness model, digital cross‑sell, and demographic tailwinds support a valuation premium over the broader fitness & wellness sector.

7. How analysts might model the impact

Revenue‑build‑up model – Add incremental membership revenue (≈ $6 mm in FY2025, $12 mm by FY2027) and ancillary spend (≈ $2‑$3 mm).
EBITDA margin uplift – Apply a 30 % margin to the incremental revenue, then phase‑in a +30 bp margin improvement to the consolidated EBITDA (reflecting economies of scale).
CapEx amortisation – Spread the $40 mm build‑out over 5‑7 years (straight‑line depreciation ≈ $6‑$8 mm/yr) to capture the impact on EBITDA.
Discounted cash‑flow (DCF) – Use a WACC of 7‑8 % (typical for a stable, cash‑generating health‑club operator) and a terminal growth rate of 2‑3 %. The incremental cash‑flows from the Atlanta club add roughly $1‑$1.5 mm of free cash flow in the terminal year, nudging the intrinsic equity value upward by ~2‑3 %.
Multiple‑valuation cross‑check – Compare the implied EV/EBITDA from the DCF with the peer median (13×). If the model yields 12.5×, analysts will likely price‑up the stock, reflecting the premium.

8. Take‑away for investors & stakeholders

Short‑term: Expect a minor dip in Life Time’s valuation multiples as the company absorbs the capital outlay and the new club’s EBITDA ramps up.
Mid‑term (2‑3 years): As the club reaches full capacity and cross‑sells digital and ancillary services, Life Time’s growth premium should push its EV/EBITDA and P/E above the average of the fitness & wellness industry.
Long‑term: The Atlanta expansion is a strategic lever that reinforces Life Time’s positioning as a “premium lifestyle” brand, allowing it to consistently trade at a modest multiple premium (≈ 0.5‑1.0× higher EV/EBITDA and P/E) relative to the broader sector.

In short, the new Atlanta club is a value‑creating catalyst that will initially compress Life Time’s valuation ratios but, once the club is fully operational, will expand those multiples—placing Life Time on a higher‑multiple trajectory than the average fitness‑and‑wellness peer group.