US-listed Peloton (NASDAQ:PTON) stock fell heavily last week. Is this a great opportunity for UK investors like me to buy a lockdown winner from across the pond? Here’s my take.

Why is Peloton stock falling?

One reason is a slowdown in revenue growth. As Covid-19 restrictions have lifted, Peloton has struggled to shift as many of its premium exercise bikes as it did in 2020. Accordingly, the firm now believes Q1 sales will come in at $800m. That’s a significant miss from the $1bn expected by analysts.  

On top of this, the company has also had to deal with the fallout from the tragic death of a child who was pulled underneath one of its treadmills. In response, Peloton recalled its Tread and Tread+ products in the US. A similar recall happened in the UK after the running machines’ consoles developed a nasty habit of falling off. All this has added to company costs and potentially hurt its reputation. Investors are sweating. 

Will this continue?

Lacking a crystal ball, no one knows what will happen. However,  we do know Peloton intends to lower the cost of its once-highly-coveted bike for a second time by 20%.

While another reduction in price might attract those initially put off by the cost, it will also cause a near-term impact on earnings. That’s understandably frustrating for those already holding Peloton stock since the business only announced its first profitable quarter as a listed company in September last year.

Given the market’s obsession with what happens over the next few months rather than years, I suspect Peloton could be in for a rough ride for the rest of 2021. Bear in mind too that the S&P 500 could conceivably let off steam soon.

No matter. There are a number of other ways I can tap into the keep fit/wellness industry without buying Peloton stock. 

Better buys?

I’d be more tempted to buy shares in Gym Group. Back in May, it announced that trading since being allowed to reopen was outperforming its own expectations. Membership numbers have bounced back, suggesting that the social aspect of exercise is still important to fitness fanatics.

Another alternative would be retailer Halfords. Like Peloton, the UK company was a huge beneficiary of multiple UK lockdowns as people sought to stay fit (and sane) by getting outside on their bikes. Despite rising 122% in value over the last year, the shares still change hands for just 12 times earnings. Then again, one drawback is that riders tend not to replace their durable companions every few months. 

A third option is nutrition firm Science in Sport. Its share price has climbed almost 150% since last August. However, its small-cap status makes the stock potentially very volatile. Competition is also fierce. I think this is arguably the riskiest option of the three.

Hard pass

The fall in Peloton stock isn’t a complete surprise. We’ve seen a few UK lockdown winners drop in value as investors have piled back into battered value plays. 

The lack of consistent profits, however, is more worrying for me. Aside from aesthetics and tech, I’m still struggling to justify buying one of its machines when cheaper options still do the job. If I wouldn’t buy as a consumer, why would I buy as an investor? 

For now, Peloton stock is a hard pass for me.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Peloton Interactive. The Motley Fool UK has recommended The Gym Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Why is the Cineworld share price falling?

One potential explanation for the decline might be a simple bout of profit-taking. Having done so well over recent months, it’s only natural some traders will want to sell up and move on.

Whether this decision is the right one is debatable. On Monday, the FTSE 250 firm revealed it had seen a “strong opening weekend” and that it expected audience numbers to continue rising in the months ahead. With delayed blockbusters such as Top Gun: Maverick, No Time to Die and Black Widow finally due for release, it’s possible that recent weakness in the Cineworld share price will prove temporary.

That said, I’m still wary. The arrival of warmer weather in the UK risks spoiling the party. On top of this, investors can’t overlook the astonishing amount of debt still weighing on the balance sheet.

There are also developments within the film industry that need to be considered. The chance of movies being made available to stream at the same time they’re released in cinemas could be another headwind for Cineworld, especially once all the additional costs of making at trip are factored in.   

Taking the above into account, it’s perhaps to be expected the company remains a favourite with short-sellers (those betting that a particular share price will fall). As I type, Cineworld is the second most hated stock on the market. The only stock attracting more short-sellers, according to shorttracker.co.uk, is supermarket giant Sainsbury.

Are there safer ‘reopening’ opportunities in the market? I think so.

A better opportunity?

Today’s update from low-cost gym provider The Gym Group (LSE: GYM) has been warmly received by the market. It’s not hard to see why. 

With all of the company’s 187 sites now open, trading has “outperformed” management’s own expectations. Total memberships climbed from 547,000 at the end of February to 729,000 by 24 May. This brings the company close to the 794,000 memberships seen in December 2019. Fitness fans are also visiting sites at record levels (an average of 1.5 times per week). 

Although trading may slow during the summer, GYM is in no mood to rest. Having opened four new gyms since 12 April, the firm looks set to take advantage of (newly) vacated sites and continue growing its estate. With net debt of “only” £63m at the end of April, GYM is clearly in better financial health to achieve its goals than Cineworld.

Of course, any investment involves risk and GYM’s no exception. In my view, there’s a distinct lack of economic moat here. As a result, the company will likely always face fierce competition for members.

There’s also no guarantee the popularity of working out from home, from both a convenience and cost perspective, won’t continue rising. And, as much as I hate to say it, there’s also a chance that coronavirus infection rates could spike again. 

Despite these potential drawbacks, I suspect I’d feel far more comfortable buying GYM over CINE right now. 

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended The Gym Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

You cannot top the excitement generated by a monster growth stock, and they don’t get more monster-ish than private healthcare operator NMC Health  (LSE: NMC). This is a 12-bagger over five years, its share price up a rampaging 1,111%.

Your good health

It is now a listed company with a market capitalisation of £8.25bn, so it would be unrealistic to expect another blast of 12-baggery, although it still has lots of momentum, rising 48% in the past 12 months alone. However, it has been trumped by a smaller company, The Gym Group (LSE: GYM), which is up 56% in the last year and today reported a strong first half with “growth across all key metrics”. My Foolish colleague Edward Sheldon predicted its success in January. 

The Gym Group, which runs 147 low-cost, no-contract gyms across the UK, reported a 36.1% rise in revenues to £58.3m, while group adjusted EBITDA rose 28% to £17.5m. That sounds good, but the stock actually fell around 2% on the news, as margins dipped from 32% to 30.1% year-on-year, “reflecting immature estate profile and Lifestyle conversions”.

easyGym does it

Statutory profit before tax fell 14.4% to £5.1m, but that was down to an increase in exceptional costs to £1m, primarily relating to the acquisition of easyGym. Adjusted earnings per share (EPS) rose 7.8% to 4.2p, while the interim dividend went from 0.3p to 0.35p, a 16.7% increase.

So why are investors in a sweat? The £437m company trades at a pricey forward valuation of 34.5 times earnings, and at that hefty valuation, any interruption to the growth story is bound to jangle nerves. However, EPS projections look promising, with City analysts pencilling in 25% growth this year, and 37% in 2019. That should shrink the P/E to a more amenable 24.3 times earnings. The yield is just 0.5% but with cover of six, there is plenty of scope for progression.

The Gym Group continues to acquire new sites and is setting up a personal trainer programme, and although there are limits to growth with consumer pockets stretched at the moment, it looks in good shape.

Strong medicine

NMC Health issued its own half-year report and business update earlier this month to a much warmer welcome, with the stock bouncing 6% once investors had digested the numbers, which included a 20% rise in revenues and 30% increase in adjusted EPS.

Although it is London-listed it has little exposure to the flatlining UK private healthcare market, but instead focuses on the Gulf Cooperation Council (GCC), with an international reach that sees its doctors treat 8.5m patients across the UK, Spain, Italy, Denmark, Slovakia, Egypt, Brazil and Colombia.

Plenty of bite

Four years of double-digit EPS growth are expected to continue this year and next, with impressive projections of 35% in 2018 and 29% in 2019. NMC currently trades at an intimidating 48.7 times earnings but that strong anticipated growth should whittle it down to 27.5 times next year.

The forecast yield may be low at 0.5% but cover of 5.3 offers scope for progression, with management promising to be generous, with a policy of paying out 20%-30% of after-tax profits.

I think both these monsters may continue to roar.

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harveyj has no position in any of the shares mentioned. The Motley Fool UK has recommended NMC Health and The Gym Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The first, which released impressive annual results this morning, has been in existence for little more than 10 years. It joined the stock market towards the end of 2015 and is listed in the FTSE SmallCap index. The second has a heritage extending over 100 years and is a mid-cap FTSE 250 company. Although very different businesses, I’d be happy to buy a slice of both today.

Good workout

Much as Aldi and Lidl have shaken up the supermarket sector, some no-frills operators are finding strong demand for their offering in the gyms segment of the leisure market. The Gym Group (LSE: GYM), which claims to be the pioneer of low-cost gyms in the UK and the fastest growing operator in the sector, today reported a 24% increase in annual revenue to £91.4m.

Top-line growth was helped by the opening of 21 new gyms and the acquisition of 18 others, which increased the total estate to 128. Growing scale benefitted the bottom line, with the company posting a 32% rise in underlying earnings per share (EPS) to 7.4p. The shares are trading a little lower on the day at 253p, which values the business at £325m, and puts it on a price-to-earnings (P/E) ratio of around 34.

On the face of it, the rating isn’t cheap. However, the company plans to open a further 15 to 20 new gyms this year and will also benefit from the profitability of those sites opened in recent years reaching maturity. As a result, strong EPS growth is forecast to continue, rapidly reducing the P/E — to around 27 this year and 21 next year.

The investment proposition looks highly attractive to me. In the short term, management sees “no material identifiable impacts from Brexit at this time” and reckons the business has “the ability to thrive even if the economy becomes less buoyant.” In the long term, there’s potential to double the size of its estate. Finally, a current modest dividend of 1.2p a share (0.5% yield) has scope for considerable growth in the future.

Rich vein

The share price action of precious metals miners can be volatile, often being an exaggerated version of the prices of the metals themselves. Miners can’t do much about metals prices but can focus on maintaining a strong balance sheet, prudently building their asset base and operational efficiency.

For these reasons, silver miner Hochschild (LSE: HOC) is a company I’ve long admired. And with its share price at sub-200p, compared with a 52-week high of over 330p, I believe now could be a great time to invest in this business.

Record production in 2017 produced a solid rather than exhilarating bottom-line outcome, but EPS growth is set to accelerate rapidly over the next couple of years. City analysts are forecasting $0.11 (7.9p at current exchange rates) this year, followed by $0.17 (12.2p) next year. This gives a P/E of 25, falling to 16, and a price-to-earnings growth (PEG) ratio of 0.3, which is well to the value side of the PEG fair value marker of one. With dividends also set to pick up, giving a prospective yield of 1.2%, rising to 1.6% next year, I see a lot to like about Hochschild at the current share price.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Investing in small-cap stocks can be very profitable if you go for high-quality, well-managed companies. Today I’m looking at two such companies that have strong growth prospects for the year ahead.

The Gym Group

There are no prizes for guessing what The Gym Group (LSE: GYM) does. The £290m market cap group is the owner of 128 budget gyms across the UK and is rapidly rolling out new gyms at a rate of around 15-20 per year. It now has an estimated 22% share of the low-cost gym market and has captured around two-thirds of the market’s growth since March last year. Does the company have investment potential? I believe so.

A trading update released this morning for the year ended 31 December looks solid. For 2017, total year-end memberships rose by 36% to 607,000, with revenue climbing 24%. Management sounded upbeat about the future, with CEO John Treharne stating: “Looking ahead, we have a very strong foundation and a proven rollout model from which to build the business and increase its profitability further.”

Are the shares attractively priced? With analysts forecasting earnings per share of 9.1p for FY2018, The Gym Group currently trades on a forward-looking P/E of 25. While that’s clearly not a bargain valuation, I don’t believe it’s an unreasonable one either, given the company’s growth. If GYM can execute on its growth plans, I see no reason why the shares can’t keep trending upwards.  

Restore

Another small-cap company with strong growth prospects for 2018 is Restore (LSE: RST). The £640m market cap company provides services such as document storage, document shredding and workplace relocation. The stock is a favourite of UK small-cap specialist Mark Slater,- one of the best stock pickers in the business.

Restore doesn’t have the most exciting business model in the world, yet sometimes, boring investments can be highly successful. In Restore’s case, a £2,000 investment five years ago would now be worth around £10,000, a gain of almost 400%. Are there more gains to come? For long-term investors, I think there could be.

The company stated in September that the second half of 2017 had started well and that the Board expected to deliver a full-year performance “slightly ahead of previous expectations.” Analysts expect the momentum to continue in 2018, with revenue and net profit growth of 6% and 15% forecast respectively. A dividend hike of approximately 24% is also currently anticipated.

What about the valuation? The shares currently trade on a forward-looking P/E of 22.1, which, like The Gym Group’s valuation is not a bargain. However, at the same time, I don’t think that price metric looks excessive either, given Restore’s growth track record and future prospects. A glance at the chart reveals that the share price has been trending upwards slowly for around eight years now. If the company can keep growing its profits, there’s no reason this upwards trend can’t continue.

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Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Overseas markets

The AIM-listed business revealed that total revenues grew from £6.48m to £8.27m during the six months to 30 June, with a particularly strong performance from its e-commerce business. This delivered 87% growth across all markets, and now accounts for 51% of total revenues. International sales growth was also impressive at 55%, with 27% of total revenues coming from overseas markets, compared to 22% for the same period in 2016.

Science in Sport (SiS) develops, manufactures and markets sports nutrition products for professional athletes and sports enthusiasts. SiS products are sold in a range of retail channels, including specialist sport retailers, major grocers, high street retailers and e-commerce websites.

A monster in the making?

The business has been investing heavily in international markets, with major emphasis on building brand awareness and implementing its online customer acquisition and conversion model. The brand is particularly strong in the elite athlete community, with no less than 34 medal-winning athletes or teams using the company’s products at the 2016 Rio Olympics.

Focusing on international expansion and investing in the e-commerce business seems to me the right way to go, and I reckon these key areas of growth might one day transform this small-cap weakling into a fully-fledged FTSE monster.

Health and fitness

No-one can deny that health and fitness is big business these days, and one of the most noticeable trends of modern times has been the increase in gym membership in the UK. Here, low-cost operator The Gym Group (LSE: GYM) is making great inroads into what is undoubtedly a growing market. The group’s disruptive business model allows its members 24/7 access to almost all its sites on a pay-as-you-go basis. That’s right, there’s no contract to sign and membership can just stop and start as required.

Founded just 10 years ago, the Guildford-based group pioneered the low-cost operating model that now boasts 98 gyms in major towns and cities nationwide, and whose membership has swelled to over half a million. The business continues to expand rapidly, and only last week announced its latest acquisition, Lifestyle Fitness, for £20.5m.

Expanding bottom (line)

The group will acquire Lifestyle’s 18 gyms, located mainly in the Midlands and North of England, 10 of which will immediately be converted to The Gym brand, with the remaining eight sites continuing to operate under the Lifestyle Fitness brand, to be converted in due course.

The move is part of the group’s previously stated strategy to identify bolt-on acquisitions as a way of accelerating its rollout, and analysts are expecting the rapidly-expanding estate to boost earnings by almost 30% by the end of next year.

The shares may look expensive at 28 times forecast earnings, but this falls to 24 next year, not too expensive given the rapidly expanding bottom line. Slim waists and fat wallets – now there’s a winning combination!

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Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The stock was last 4% lower on the day, retreating further from September’s 28-month tops, above 480p per share. However, this is reflective of mere profit taking rather than signs for concern as PureCircle’s market value has almost doubled since the start of the 2017.

The stevia sweetener producer advised that revenues during the 12 months to June 2017 fell 14% year-on-year to £118.9m, and this pushed operating profit 47% lower to £17.6m.

PureCircle was whacked by the US Customs & Border Protection, placing the firm on its Withhold Release Order (WRO) list. That saw its products banned for import last year while allegations that they were produced by forced labour in China were being investigated.

The ban was lifted in January, but the firm advised that “the impact of this WRO on our business was significant and continues to be felt today,”  and that it will take time to build up US momentum again in a market generated a third of its total sales in 2016.

On the right track again

While the first half result was disappointing (if not surprising), there was still  plenty to take away from PureCircle’s release. Sales outside the US increased by a healthy 8% during fiscal 2017, illustrating the strength of global demand for stevia products.

And the Malaysian company continued to invest heavily last year to underpin future sales growth. It invested $42m it its stevia refinery in Malaysia, and the huge sums it has dedicated to product R&D saw 124 new products hit the shelves last year.

With sales of the sweetener booming across the globe, and the troubles it experienced in the States now behind it, I believe PureCircle can look forward to exceptional earnings growth in the years ahead. And City analysts have predicted a 130% bottom-line rise in the current fiscal year alone.

A forward P/E ratio of 62.9 times may look unappealing on paper, although a sub-1 PEG reading of 0.5 suggests the business is actually attractively priced relative to its growth prospects. I reckon PureCircle is a very attractive investment destination.

Upping the pace

I’m also convinced that demand for The Gym Group’s (LSE: GYM) cheap fitness passes should continue to boom as growing restraints on Britons’ spending power worsens, and the keep fit craze drives ever-more people onto the treadmill.

The Guildford-based business saw revenues shoot 19% higher during January-June to £42.8m, and the low-cost operator continues to aggressively expand to bolster sales growth. Last week, the group snapped up 18 gyms from Lifestyle Fitness for £20.5m, and plans to open 20 new sites under its organic rollout programme this year alone.

Against this backcloth, City brokers predict earnings expansion of 34% and 19% for 2017 and 2018, respectively, resulting in a prospective P/E rating of 28.4 times and a corresponding PEG multiple of 0.8. I reckon The Gym  Group is also worthy of serious consideration at the present time.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

One potential example is low-cost gym operator The Gym Group (LSE: GYM). The firm’s shares rose by 6% this morning after it announced the acquisition of a rival 18-gym chain, Lifestyle Fitness.

The Gym Group currently has 97 sites and is rolling out new ones at a rate of 15-20 per year. So the addition of the Lifestyle Fitness locations should double its growth rate over the next year.

Is the price right?

Gym Group is paying £20.5m for the acquired sites. These generated earnings before interest, tax, depreciation and amortisation (EBITDA) of £3.45m over the last 12 months. That prices the deal on around six times EBITDA, which seems reasonable to me.

However, although the new sites have similar profit margins to Gym Group’s existing units, they do appear to need some work. The company is planning to spend £5.4m on updating and converting them. My calculations suggest that the total cost per site will be around £1.4m, roughly the same as the cost for the fit out of a new site.

The advantage of this approach is that Gym Group will also acquire the membership of its new sites. So they should generate a return on investment more quickly than a newly-opened site.

Time to buy?

This company’s strong cash generation means that it’s able to fund most of its rollout without debt.

Although the dividend yield is low at 0.5%, as sites mature I expect more cash to be available for shareholder returns. In the meantime, I think this business offers an exciting growth opportunity and remains attractive at current levels.

A high-yield rollout

If you’re attracted to profitable rollouts but need a higher dividend yield, then my second stock may interest you.

Hollywood Bowl Group (LSE: BOWL) is the UK’s largest operator of 10-pin bowling sites, with 56 centres around the country. The majority of these are located in out-of-town retail parks and leisure centres. Each site typically has a restaurant, licenced bar, and a games arcade in addition to bowling, so the potential spend per customer is quite high.

The firm’s recent results showed a solid first-half performance. Total revenue rose by 7.9% to £59.3m, while the group’s operating profit rose by 18.5% to £13m. This lifted the group’s operating margin from 19.8% to 21.9%, suggesting that economies of scale are available as the business grows.

These bowling complexes require fairly large sites in areas with reasonable population density. So it’s not clear to me how many sites this group will be able to open. But I think it is worth noting that leisure businesses such Hollywood Bowl are starting to become key anchor tenants at many sites, including retail parks. This could mean that the long-term growth potential of this business is greater than you might expect.

The shares currently trade on a forecast P/E of 16, with a prospective dividend yield of 3.4%. Earnings per share are expected to rise by 14% next year, giving a forecast P/E of 14. This valuation looks undemanding to me, so the stock could be worth a closer look.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Hollywood Bowl. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Unfortunately, today’s interim results have simply poured more petrol on the fire. Over the 26-week period to start of July, revenue at the small-cap fell 3.4% to £160.5m. As a result of “substantial changes” to its operating model, the company booked an adjusted pre-tax loss of £14.2m.

While reflecting that new sales initiatives and cost savings had allowed HSS to return to profitability in June and should lead to a stronger performance in H2, new CEO Steve Ashmore stated that the rate of recovery had been “materially slower than originally expected“. An update on a detailed strategic review is expected in November but it’s fair to assume that a reversal of HSS Hire’s fortunes is going to take a lot longer than first thought.  

Falling 25% in early trading, shares have recovered somewhat. So, is this a knife worth catching? Not in my view.

Aside from today’s awful set of figures, HSS’s extraordinarily high debt burden and inability to consistently turn revenue into solid profits make it a stock for only the most risk-tolerant, patient investors. Free cashflow is unpredictable at best and there’s no dividend to speak of. While a turnaround isn’t beyond the realms of possibility and some kind of bounce may be experienced as traders speculate that today’s reaction has been overdone, I simply can’t see a recovery being anything but long and painful.

Time to take profits?

Also releasing interim numbers this morning was budget gym operator The Gym Group (LSE: GYM). While its results are far better than those presented by HSS, Gym is another stock I’d sell today if for completely different reasons.

In the six months to the end of June, revenue rose just under 19% to £43m with adjusted pre-tax profits coming in almost 42% higher at £6.5m. Membership numbers climbed almost 20% to 508,000 with the company opening six new sites over H1 and two after the reporting period ended (bringing its total estate to 97 gyms). It now expects to hit the top end of its guidance range for new openings (15-20) over 2017.

Elsewhere, strong cash generation allowed management to reduce the amount of debt by £600,000 to £4.6m. The interim dividend was also raised a healthy 20%, even if the overall yield remains negligible.

Despite all this, I still have concerns over how much investors are expected to pay for Gym’s shares. Before today, the stock was already trading on an expensive forecast price-to-earnings (P/E) ratio of 27. While it’s not surprising that the market liked these figures (Gym’s share price rose 5.5% in early trading), I just don’t see enough upside ahead to warrant this heady valuation. 

With operators competing for the same members in an already saturated market, a lot rests on effective marketing — the costs of which aren’t insignificant. What’s more, memberships are surely among the first things to be sacrificed in the event of an economic downturn — assuming, of course, that people still remember that they have them. With Brexit on the horizon and the stock seemingly stuck in the 175p-210p trading range, I’d be inclined to take any profits sooner rather than later. 

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The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes

Investor appetite for The Gym Group (LSE: GYM) has remained relatively muted in mid-week trading following the release of reassuring trading figures.

The stock was last 1% higher from Tuesday’s close, and edging back from seven-month peaks above 200p earlier in the session.

The Gym Group advised that “trading for the first five months of the year has met the Board’s expectations and profit for the full year 2017 is anticipated to be in line with consensus market expectations.”

Membership numbers at the firm — which operates the low-cost The Gym — swelled by a terrific 19.6% from the corresponding 2016 period, to 507,000.

And it remains on track to have 95 sites up and running by the end of June, it said, with the opening of six gymnasiums executed in the half year. The company added that is likely to hit the upper end of its targeted 15-20 openings for the full year.

Setting the pace

Clearly Britain’s fitness craze is showing no signs of slowing, and The Gym Group is putting itself  in a strong position to continue exploiting this trend through its low-fee model and rampant expansion. Indeed, I believe the rising pressure on Britons’ wallets could actually bolster the firm’s membership base as keep-fit enthusiasts switch down from more expensive clubs like Nuffield.

City brokers certainly expect earnings at Gym Group to continue their trek higher, and healthy rises of 35% and 18% are chalked in for 2017 and 2018 respectively.

At first glance the fitness freak may not appear a compelling value pick, a forward P/E ratio of 26.1 times sailing outside the widely-regarded value benchmark of 15 times or below. But scratch a little deeper and The Gym Group actually appears attractive value relative to its growth potential, with a sub-1 prospective PEG reading of 0.7.

I consequently reckon the share price has further room for fresh gains.

Grab a piece of the action

Just Eat (LSE: JE) has proved itself to be a tasty stock for growth hunters, the firm generating double- and even triple-digit bottom-line expansion for many years now.

And while revenues may have slowed more recently, the City does not expect this breakneck bottom-line growth to cease just yet, with earnings rises of 37% this year and 38% in 2018 currently expected.

Like The Gym Group, Just Eat also deals on what could be considered a conventionally-high forward earnings multiple, the takeaway titan dealing on a reading of 39.4 times. However, a PEG reading of one suggests the business remains attractively priced, and I would expect investors to drive the share above this month’s record highs of 683p sooner rather than later.

Just Eat saw like-for-like sales rocket 40% higher during January-March, with underlying orders exploding 25% during the period to some 39m. In the UK, total orders rose 17% while at its overseas operations, Just Eat saw orders shoot 38% higher.

Although the proposed acquisition of Hungry House may run into regulatory troubles, I reckon Just Eat can still rely on its expanding geographic footprint to deliver stunning earnings expansion long into the future.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Just Eat. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.