Intangible Valuation
Value, contrarian, coat tail rider, idiosyncratic research

Town Sports International: Entrenched With A 12% FCF Yield

Founded 1973, Town Sports International Holdings (NASDAQ:CLUB) owns and operates 160 health and fitness clubs with 512,000 members. With a current market capitalization of $300 million and TTM earnings of $12.3 million, the stock only offers an earnings yield of 4.1%. But there are reasons to think that GAAP net income number is not representative of cash earning power, primarily because of the difference between depreciation and actual cash spent on PP&E. To illustrate, in 2012, depreciation and amortization came in at about $49 million, while capital expenditures have averaged $25 million over the past three years -- a difference of $24 million. We should, therefore, use a measure of cash earnings or free-cash-flow to estimate intrinsic earning...

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