BERLIN, GERMANY – JUNE 27: General view of the Peloton stores in Berlin on June 27, 2020 in Berlin, … [+]
We think that Peloton stock (NASDAQ: PTON), an at-home fitness company that sells connected exercise bikes and treadmills, and related fitness subscriptions, is currently a better pick compared to WW International stock (NASDAQ: WW), a company best known for its weight loss and fitness services, despite Peloton’s richer valuation multiple. While Peloton trades at about 5.8x trailing revenues, WW International trades at just about 1x trailing revenue. Moreover, Peloton has also yet to turn an annual profit, compared to WW International, which has been almost consistently profitable. However, there is more to the comparison. Let’s step back to look at the fuller picture of the relative valuation of the two companies by looking at historical revenue growth as well as operating margin growth. Our dashboard Peloton Interactive vs WW International: Industry Peers; Which Stock Is A Better Bet? has more details on this. Parts of the analysis are summarized below.
1. Peloton’s Revenue Growth Has Been Stronger
Peloton’s revenues have grown at about 54% year-over-year over the most recent quarter (Q4 FY’21) to about $937 million, this is well ahead of WW International which saw revenues decline -7% over its most recent quarter. While Peloton continued to benefit from strong demand for its fitness equipment and improved supply of its products, WW is seeing a decline due to a tough comparison with last year, and a decline in its Studio fitness business, which saw its subscriber base drop almost 30% versus last year. Peloton’s average historical growth rate has also been higher and more consistent. For instance, Peloton has roughly doubled its revenues every year over the last three years, while WW International’s revenues have grown at a compounded rate of under 2% over the same period.
Looking forward, Peloton revenues are estimated to grow 30% y-o-y to $5.2 billion in 2022, while WW will likely see a -5% decline, per our estimates. Our WW International Revenue dashboard provides more insight into the company’s revenues.
2. WW Has Thicker Margins, But Peloton Is Posting Better Margin Growth
Peloton remains loss-making, with its operating margins standing at about -5% over the last fiscal year. In comparison, WW International …….