Town Sports International

Town Sports International (CLUB - Snapshot Report) has not been immune to the late-summer selling, but earnings continue to move higher. Valuations are coming down and this Zacks #1 Rank (Strong Buy) should prove to be a good long-term buy.

Company Description

Town Sports International is an owner/operator of fitness clubs in the Northeast and Mid-Atlantic regions. They are the 5th largest club operator in the U.S and also have 3 locations in Switzerland.

Estimates Still Rising

Since Town Sports was featured as a Rank Buy back in August, it has seen round of upward estimate revisions. And those came without any significant news.

This year's Zacks Consensus Estimate is up 3 cents, to $0.41 in the past month. The 2012 average estimate rose 4 cents, to $0.64. Last year CLUB brought in a dime per share, putting annual growth rates at 310% and 57%, respectively.

Stock Heading Lower

During that time the share price has tumbled in the face of the broader sell off. While the valuations are still not great, they are improving given the lower price and higher estimates.

Shares are going for about 11 times the 2012 estimates, which gives them a PEG near 1.1 times. Not a bad deal. The price-to-sales ration is just under 0.4 times.

New Jobs

While fears of recession have caused many companies to freeze hiring or even layoff current employees, Town Sports is hiring. In early September the company announced that it is looking to fill more than 1,000 jobs in the U.S.

Company's can offer up all the corporate speak they want about the future, but hiring and expanding is the ultimate sign of confidence.

The Chart

With the market's current turmoil it is tough to buy into anything. But looking at the divergence between earnings and share price, now should end up being a good long-term entry point.

Read the Aug 3rd Feature Here

Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Small Cap Trader service

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