Life Time Fitness looks pretty healthy
— -- A: Life Time Fitness is trying to help you and your family fit into your jeans.
The Minnesota-based company was running about 60 sports and athletic fitness center in 13 states as of February. Life Time Fitness is trying to be more than just a gym filled with rows of treadmills and exercise bikes. Many of its centers have swimming pools with slides, basketball courts, childcare centers, spas, climbing walls and other fun and active things for the family to do. It's a interesting idea. Rather than take the kids to a pizza parlor or bowling alley, you could, in theory take them to a Life Time Fitness center where they could play in the pool, or take classes in hip-hop dancing, basketball, karate, yoga and even Spanish.
Investors seem to think it's a good idea, too. Shares of Life Time Fitness have gained 23% this year through mid-September, during which time the Standard & Poor's 500 rose just 7.1%.
But is this the stock that will put your portfolio into good health? To find out, we'll put it through the paces and subject the stock to the four Ask Matt steps:
Step 1:Risk versus reward. When you take a risk on a stock, you want to make sure you're properly rewarded. So we download the company's trading history back to 2004. During that time, it generated an average annual compound rate of return of 33%. That is exceptional, and well above the return of the Standard & Poor's 500 during the same period.
And to get that return, you accepted relatively moderate risk of 12.8 percentage points.
This stock's volatility has been pretty average and the returns have been outstanding. So far, this stock looks to fit your criteria and probably explains why you own it. There's just one giant caveat. We're basing this analysis on just three years of data, which is not even close to being an adequate sample. Many think you need at least 20 years before this analysis is meaningful.
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