Life Time Group Holdings, Inc. (LTH): what the price requires

Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/LTH

Headline

Field	Value
Ticker	LTH
Company	Life Time Group Holdings, Inc.
Current price	$41.43/sh

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Field	Value
Inversion basis	whole-company
Operating margin needed	4.8%
Operating margin today	16.0%
Margin compression implied	-11.2pp
Must persist for	5.7y
Multiple paid	27x operating income

The operating-margin requirement is derived from the framework's value band at year 7, a separately labeled basis from the headline growth/duration solve.

Solve inputs: computed at a 9.5% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~1.8 years.

How unusual the bet is: elevated

Reference	Value
vs own history	+0.26σ
cohort percentile (of 32 peers)	59
sustained it ~5.7 years at this level	27%
implied end-window share	0%

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Family	Median price/FV	Models	Reads
Asset	2.00x	5	expensive
Earnings	1.50x	2	expensive
Relative	1.50x	5	expensive
Growth	0.69x	3	justifies

Families that justify the price: Growth Families that call it expensive: Asset

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.5%); the inversion above states its own rate.

Per-Model Detail (n=15)

Model	Family	FV	Price/FV	Applicable	Methodology
DCF Perpetual Growth	Growth	$83.08	0.50x	yes	FCF base $0.6B, growth 13% (input: historical growth), terminal g 4.0%, WACC 7.5%, 6yr projection
DCF Exit Multiple	Growth	$60.33	0.69x	yes	Exit EV/EBITDA: 14.5x / 16.5x / 18.5x (bear / base = today's held flat / bull), 6yr
Relative Valuation	Relative	$27.64	1.50x	yes	P/E 17.13x (blended: static sector reference 14x + trailing (TTM) 24x), scenarios: 14.1x / 17.1x / 20.1x (bear / base = reference held flat / bull), EV/EBITDA 11.26x
Simple DDM	Growth	—	—	no	—
Two-Stage DDM	Growth	—	—	no	—
Simple Excess Return	Asset	$18.33	2.26x	yes	BV/sh $14.15, ROE (TTM) 12.0%, ke 9.3%
Two-Stage Excess Return	Asset	$20.74	2.00x	yes	5yr excess ROE then converge to ke=9.3%
Discounted Future Market Cap	Growth	$38.90	1.07x	yes	Rev $3.1B, growth 13% (input: historical growth; tapered), Terminal P/S: 2.5x / 3.1x / 3.6x (bear / base = today's held flat / bull, cap 12x)
Peter Lynch Fair Value	Relative	$59.85	0.69x	yes	EPS $1.71, growth 35% (input: historical EPS growth), PEG=0.70 (Undervalued)
Margin Trajectory	Growth	—	—	no	—
Earnings Power Value	Earnings	$0.01	4143.00x	yes	Normalized EBIT (5y avg op income, one-time charges added back) $0.18B × (1−26%) / WACC 7.5% → EPV (no growth) (excluded from median)
Residual Income	Asset	$21.22	1.95x	yes	BV $14.15 + 5yr PV of (ROE (TTM) 12.0% − Kₑ 9.3%) × BV; BV grows 7.8%/yr
Graham Number	Asset	$23.34	1.78x	yes	√(22.5 × EPS $1.71 × BVPS $14.15) — Graham's conservative floor
EV/EBITDA Relative	Relative	$14.45	2.87x	yes	EBITDA $0.81B × sector EV/EBITDA 9.0x
FCF Yield	Earnings	—	—	no	—
SBC-Adj FCF Yield	Earnings	—	—	no	—
Ben Graham Formula	Earnings	$55.18	0.75x	yes	EPS $1.71 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/B	Asset	$2.57	16.12x	yes	BV $14.15 × (ROIC 1.4% / WACC 7.5%)
P/Sales Sector	Relative	$27.06	1.53x	yes	Revenue $3.08B × sector P/S 2.0x
PEG Fair Value	Relative	$64.13	0.65x	yes	EPS $1.71 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings Yield	Earnings	$18.49	2.24x	yes	EPS $1.71 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations Multiple	Relative	—	—	no	—
Clinical Phase NPV	Growth	—	—	no	—
Merton	Asset	—	—	no	—
V5 Mechanical	—	—	—	no	—

Solvency

Field	Value
Net debt	$1.4b
Net debt / NOPAT (after-tax)	3.88x
Net debt / operating income (pre-tax)	2.87x
Share count CAGR (dilution)	4.3%
Burning cash	no

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• Life Time runs premium large-format athletic country clubs, not commodity gyms, with average monthly dues rising about 10.5% and EBITDA margin expanding to 28.7% as it culls lower-value members and upgrades its mix.
• The biggest risk is that only the growth methods justify the price while the static methods call it expensive, so the bet depends entirely on durable high compounding from continued dues increases and new-club ramps against net debt of about $1.4 billion.
• Watch new-club openings and the free-cash-flow turn: the company plans 12 to 14 clubs in 2026 and expects positive free cash flow, the inflection that would validate the durable-compounding thesis.

Bull Case

Life Time is not a gym, and the distinction is the whole bull case. The standard fitness lens prices clubs as commodity boxes competing on monthly fees, but Life Time runs large-format athletic country clubs that sell a premium lifestyle, with pools, courts, spas, cafes, and programming, to a more affluent member who pays for it and stays. The 10-K captures the dynamic in its own words: members are "highly engaged and draw inspiration from the experiences and community we have created," which shows up in the "continued strength and growth of our average revenue per center membership, center usage and the visits per membership." This is a high-engagement, high-spend model, not a discount-fitness churn machine.

The pricing power is doing the heavy lifting on the financials. In the first quarter of 2026 average monthly dues rose about 10.5% and dues revenue grew 11.9%, even as the company deliberately culled lower-value memberships to upgrade its mix. Raising price while improving the member base is the opposite of a business defending share with discounts, and it flowed straight to profitability: total revenue rose 11.7% to $789 million and adjusted EBITDA climbed 18.3% to $227 million, lifting the EBITDA margin 160 basis points to 28.7%. A premium service with rising prices and expanding margins is a genuine moat, anchored in the affluence and stickiness of the membership.

The growth runway is the unit-expansion story, and management has shifted to a more capital-efficient version of it. The 10-K states the company believes it has "significant opportunities to continue expanding our portfolio of premium centers in an asset-light manner," targeting 12 to 14 new locations a year starting in 2026. Each new athletic country club in an affluent market opens a fresh pool of high-dues members, and the asset-light financing, including sale-leaseback transactions, lets Life Time grow the footprint without the full balance-sheet weight of owning every property. The company now expects positive free cash flow in 2026, an inflection from the capital-heavy build-out phase, which is what gives the durable-compounding thesis its support: rising dues per member, an expanding club count, and a turn toward self-funding growth.

Bear Case

The moat is real, but it is being approached from both ends of the market, and that is where erosion starts. At the low end, budget chains have trained a generation of consumers to expect fitness for a fraction of Life Time's dues; at the high end, boutique studios and the home-fitness ecosystem compete for the same affluent, time-pressed member. Life Time's premium positioning depends on members continuing to value the full-amenity experience enough to pay a large and rising monthly fee, and that willingness is most fragile precisely when discretionary budgets tighten. The company is raising dues over 10% a year, which works while the economy is strong and members feel wealthy, but a premium lifestyle subscription is among the first things scrutinized when household budgets compress.

The balance sheet is the structural concern. Life Time carries net debt of roughly $1.4 billion against trailing operating income of about $508 million, and interest expense is not separately broken out in the latest filings, so the coverage cushion is not visible from the financials. The company funds its expansion in part through sale-leaseback transactions, which convert owned real estate into cash today in exchange for fixed lease obligations tomorrow. That is a legitimate financing tool, but it trades balance-sheet assets for a stream of rent payments that must be serviced through any downturn, and it leaves the company more exposed to a soft membership cycle than the headline net-debt figure alone suggests.

The valuation requires the durable-compounding story to hold, and only one lens supports it. The asset-based, earnings-power, and peer-multiple methods all read the stock as richly valued; only the growth-based methods reach the price. That means the buyer is paying entirely for continued high growth, not for the current earnings or the asset base. The model also runs on continuous new-club construction, with nine of fourteen planned 2026 openings still under construction, so the growth is capital-intensive and execution-dependent. If new clubs ramp slower than planned, if dues increases finally meet member resistance, or if a recession pressures the affluent consumer, the growth assumption that is the sole support for the price weakens, and the static methods that already say the stock is expensive become the relevant frame.

Valuation

The price rests on a single lens, and naming that honestly is the start of the valuation. The asset-based, earnings-power, and peer-multiple methods all read Life Time as richly valued; only the growth-based methods reach the price. That pattern means the market is paying a durability premium, a bet on continued high compounding that the static frames structurally cannot price. Inverting the price into an assumption, it embeds operating profit growing on the order of 24% with the current profitability sustained. The buyer is underwriting years of dues increases and successful new-club ramps, not the trailing earnings of $1.71 per share, which the static methods value well below the price.

The more concrete way to see the bet is the new-club model. Life Time is opening 12 to 14 large-format athletic country clubs a year, each a multi-year investment that fills with high-dues members over time. The growth methods credit that pipeline converting into revenue and EBITDA at the company's recent margins; the EBITDA already grew 18.3% in the first quarter to $227 million at a 28.7% margin. The decisive question is the durability of that combination, rising dues per member plus a steady cadence of new clubs filling on schedule, because that is precisely what the price requires and what the trailing financials cannot guarantee. A peer like a casino or sports-betting operator carries different economics; the right comparison is the engagement and pricing power of a premium-experience business, which is where Life Time's case lives or dies.

Solvency is the constraint that bounds the downside and shapes the bet. Net debt of about $1.4 billion is roughly 2.75 times trailing operating income, which is manageable in a strong economy but leaves less room than an unlevered grower would have. The encouraging turn is the expected shift to positive free cash flow in 2026, funded partly by sale-leasebacks and disciplined capital allocation, with potential share repurchases. That free-cash-flow inflection is what would validate the growth premium, because a business that can both expand its footprint and generate cash is the durable compounder the price assumes. The risk is that the leverage and the lease obligations turn a membership softening into a sharper problem than the multiple anticipates.

Catalysts

The first-quarter 2026 report, released in May, showed the premium model compounding. Total revenue rose 11.7% to $789 million and adjusted EBITDA climbed 18.3% to $227 million, with the margin improving 160 basis points to 28.7%. Average monthly dues rose about 10.5% and dues revenue grew 11.9%, driven by both pricing and a deliberate shift toward higher-quality memberships as the company reduced lower-dues categories. The results came with an upgraded full-year outlook, with the adjusted EBITDA margin guidance midpoint moved to 28%.

The expansion pipeline is the forward catalyst. The company plans 12 to 14 new large-format athletic country clubs in 2026, with nine of fourteen already under construction, and reiterated strong demand for both existing and new clubs. The financial inflection to watch is free cash flow: management expects positive free cash flow in 2026, supported by sale-leaseback transactions and disciplined capital allocation including potential share repurchases. The catalysts that matter are the cadence and ramp of new-club openings, the durability of the double-digit dues growth, and the free-cash-flow turn, since together they determine whether the growth premium embedded in the price is earned.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

• ADEA (Adeia Inc.)
• (no filing in the citation store)
• BATRA (ATLANTA BRAVES HOLDINGS, INC.)
• (no filing in the citation store)
• CALX (Calix, Inc)
• (no filing in the citation store)
• DKNG (DRAFTKINGS INC.)
• (no filing in the citation store)
• FUN (Six Flags Entertainment Corporation/NEW)
• (no filing in the citation store)
• OMC (OMNICOM GROUP INC.)
• (no filing in the citation store)
• RCI (RCI)
• (no filing in the citation store)
• ROKU (Roku, Inc.)
• (no filing in the citation store)

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Life Time Q1 FY2026 results, May 2026