The Gym Group is the #2 low-cost gym operator in the UK and has underperformed our Ocean Wall Health and Fitness Index by over 94% since Covid. The industry dynamics around fitness are now excellent and the combination of significant self-help to drive margins, plus internally funded expansion, will allow the company to return increasing amounts of capital from 2026 onwards.
Their excellent year-end numbers passed largely unheard and ignored by the market. It is currently trading at 1x P/Sales, 6x EV/EBITDA, and with a free cash yield of 13%. As operational gearing comes through it will trade at c 0.8x P/S, 4.1x EBITDA and with a free cash yield of 19%.