$31.82
$89.45
bear $31.82
base $58.54
bull $89.45
margin of safety $36.00
market price* $40.52
Life Time operates 189 large, premium "athletic country clubs" (about 97,000 square feet on average) in 31 US states and Ontario, Canada. Members pay monthly dues, and the company earns additional in-center revenue from personal training, Pilates, spa, cafes, kids programs and pickleball. In 2025 it took in $3.0 billion of revenue: $2.1 billion from dues and $0.8 billion from in-center spending. Average revenue per membership rose about 12% a year in both 2024 and 2025, and revenue at established clubs grew 15.3%, 12.2% and 11.1% in 2023, 2024 and 2025. The company opened 10, 8 and 10 new clubs in those three years. It usually builds a club, sells the property to a landlord and leases it back. As a result, 134 of the 189 clubs are leased, and the rent on them is paid out of operating cash flow. How we measured earnings. We start from the cash the business actually generates. From that we subtract stock-based pay and the capital spending needed to keep existing clubs in shape, and we leave out the cost of building new clubs. The company reports its capital spending by type. In 2025, $126 million went to maintenance and $109 million to modernization and technology. We treat both as ongoing costs of staying competitive, $235 million in total. The remaining $656 million built new clubs. Measured this way, owner earnings were $176 million in 2023, $332 million in 2024 and $554 million in 2025. However, 2025 included $93 million of one-time cash that will not repeat: $54.6 million of pandemic-era employee retention tax credits and a $38.6 million insurance recovery from Zurich. Without those, 2025 owner earnings were about $461 million, or $2.04 per share. Years 2020 to 2022 are left out as unrepresentative. Clubs were closed or reopening, and the 2021 figures carry a one-time $334 million stock-compensation charge tied to the IPO. Cash taxes have been low because new construction qualifies for accelerated tax depreciation. That benefit is tied to continued building, which is one reason we value from a middle-of-the-range year rather than the 2025 peak. Valuing the business before its lenders. We add back interest paid, then use the median of 2023 to 2025 as our starting level: about $2.22 per share, the 2024 figure. After one-time items, per-share cash flow before interest grew about 9% in 2025. The base case assumes the same 9% for 2026, which simply returns the business to the level it already reached in 2025. The first half of 2026 supports this: operating cash flow of $408 million, against $380 million a year earlier. Base case ($58.54 per share). We credit two sources of growth that are already underway. First, the 18 clubs opened in 2024 and 2025 and the 2026 class now being built are still filling up with members. Second, the company has raised prices steadily for years. From the 2026 level, cash flow grows 7% and then 6%, 5% and 4% as those clubs mature, then about 3% a year through year 10, roughly in line with pricing. After year 10 we assume 1.5% annual growth. The long lease runway supports this: including renewal options, only nine of the 134 leases expire within 15 years. Price increases are partly offset by rent escalators already written into those leases. We charge about $250 million to finish the clubs we credit. We give no value to the company's plan to open 12 to 14 clubs a year from 2026. That is faster than it has ever sustained, and each club is paid for with sale-leasebacks and borrowing. We assume future clubs earn only what they cost. On this basis the business is worth about $14.6 billion. It owes about $1.33 billion net: $1.51 billion of debt plus $14 million of finance leases, less about $199 million of cash beyond operating needs. That leaves about $13.3 billion for shareholders. Bear case ($31.82 per share). Membership is a discretionary expense for affluent households. Revenue halved in 2020 when clubs closed, and years of roughly 12% annual price increases leave room for members to resist further increases. In this case 2026 grows only about 4% from the ramp of new clubs. A downturn then cuts cash flow 15% in 2027, and it takes three years to recover. After that, growth is 1% a year through year 10 and zero after that, as rent escalators absorb price increases. The business is worth about $8.6 billion, owes $1.33 billion and leaves about $7.2 billion for shareholders. Even in this case the debt is easily carried. Annual interest is about $85 million, against more than $440 million of cash flow before interest. The term loan and the 6% secured notes both mature in November 2031. The term loan is swapped to a fixed rate of about 5.4%, so the debt costs roughly 6% and we make no adjustment for its rate. Bull case ($89.45 per share). Price increases stay stronger for longer, and new clubs keep opening at the pace of the past decade, roughly 8 to 10 a year, earning more than their cost. Cash flow grows 10% falling to 4% over ten years, then 2.5% a year after that. The business is worth about $21.7 billion, owes $1.33 billion and leaves about $20.3 billion for shareholders. What could make this wrong. Operating leases total $2.6 billion. We do not subtract them as debt because rent is already paid out of the cash flows above, but they make profits very sensitive to a drop in membership revenue. Stock options and share issuance raised the diluted share count from 204 million in 2023 to 227 million today. If growth keeps depending on sale-leasebacks and new equity rather than internally generated cash, dilution will keep cutting into per-share value.