The Danger Zone Pick: 9/24/12

Life Time fitness CEO predicts 15% growth at best.

In my weekly Danger Zone interview, I explain how that expectation, even if it comes true, implies unrealistic member and profit growth.

The current stock price (~$46/share), using historical growth rates (12%), implies 20 years of profit growth.

The member growth  required to justify that level of profit growth is over 35% per year for 20 years. The current member attrition rate is 36%. So actual member growth would have to be closer to 70%. And I do not think that is possible.

The intrinsic value of this stock is closer to $25-$30, in my opinion, which is why it is in the Danger Zone.

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