Micah Zimmerman, The Motley Fool
6 min read
Getting a 10x return on a stock is not something people should take lightly. But when you break it down, a tenfold return over two decades works out to about 12% per year. That sounds modest until you count how few companies compound at that pace for 20 years. The ones that do tend to share a trait: They are building something today that the market has not yet priced in, and it should pay off for years in a sustainable way.
Life Time Group Holdings (NYSE: LTH), First Watch Restaurant Group (NASDAQ: FWRG), and Freshpet (NASDAQ: FRPT) each run consumer businesses with long runways and potential turnarounds that could pay off over decades.
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1. Life Time is building bigger, not just more
Life Time runs 195 “athletic country clubs” across the U.S. and Canada, and it has decided that the next 20 years belong to bigger buildings, according to company leadership. The 2026 class of 14 new clubs will total about 1.3 million square feet, close to double the footprint of each of the past two years’ classes. These are ground-up builds with pools, courts, and in-house clinics.
The more interesting shift is who walks in the door. Life Time has been cutting low-dues memberships paid for through medical insurance plans, and the members it keeps are paying higher dues and spending more on in-center services, personal training above all. Revenue per membership rose 11.8% in the second quarter even though the member count grew 1.2%. The company is prioritizing pricing power over headcount, a rare move for a gym chain.
I think this stock could 10x because it is doing something most gym chains never manage: raising what members pay while making the clubs harder to leave. A family that swims, plays pickleball, and books a trainer at one building is not shopping around for a cheaper membership. Stack that pricing power on top of 14 new clubs a year, each one bigger than the last, and the math over two decades starts to look reasonable. I also think fitness is a growing trend that will never go away.
These clubs are expensive to build, and Life Time pays for them with about $1.5 billion in debt plus sale-leaseback deals, in which it sells a building it owns and then rents it back for decades. That works well while members keep showing up. In a recession, the lease payments stay the same even if the parking lot thins out, and that is the part of the story I would watch closely.
