[1] Market Valuation: At P/S of 5.8, PTON is trading at a more expensive price compared to 1.0 for WW
Market ValuationWeight Watchers International IncPeloton Interactivevs Peloton InteractiveAs of 10/20/2021 Price To Sales Ratio (P/S)15.8CheaperPrice To OpInc Ratio (P/EBIT)6.5-124.9-Price To Earnings Ratio (PE)20.2-123.1-
[2] Growth & Profits: Considering the valuation, the market appears to be rewarding PTON's higher revenue growth with less regard to profitability - PTON has demonstrated better revenue growth: 110% annually in last 3 FY, 120.3% LTM, 54.3% last Q (yoy), and -25.8% last Q (qoq) - In comparison, WW has grown at 2.2%, -9.7%, -17.1%, and 2.6% respectively, during the same periods - However, WW has shown greater profit generation promise: WW, 12.1% margin, -19.7% margin expansion - The corresponding values for PTON stand at -15.8%, -22%
Growth & ProfitWeight Watchers International IncPeloton Interactivevs Peloton Interactive As of 10/20/2021 Revenue GrowthLast Q Growth (QoQ)2.6%-26%Growing FasterLast Q Growth (YoY)-17%54%Growing SlowerLTM Growth-9.7%120%Growing SlowerLast 3 Fiscal Year CAGR1.8%110%Growing Slower ProfitabilityLTM OpInc Margin15%-4.6%More ProfitableLast 3 Fiscal Year OpInc Margin Change-10%17%Greater DeclineLTM FCF Margin---
[3] Financial Risk: Also, is the market ignoring risk to PTON? Unlikely as the company does not appear to be at higher risk vs WW - PTON has a much better debt position, with debt as % of equity of 3.2% vs 114.9% for WW - WW has more cash cushion, with cash as % of assets of 11.2% vs 0.0% for PTON
Financial RiskWeight Watchers International IncPeloton Interactivevs Peloton Interactive As of 10/20/2021Debt as % of Equity115%3.2%Higher Debt LoadCash as % of Assets11%0%Better Cash Position
[4] Market Returns: What about market returns of WW vs PTON? - PTON has higher average annualized return of 24.3% vs 0.2% for WW based on key market periods - These key market periods include, year-to-date, pre-covid to now, and 1, 2, and 3 years prior to covid
MetricsWWPTON Recent Returns YTD-25.3%-41.9%LTM-22.6%-33.7%Pre-Covid To Now-39.2%230.4% Last 3 Years Returns-73.3%249.4%Sharpe Ratio-0.140.81Max Drawdown-83.1%-22.7%
Notes:
[1] Q = quarter, LTM = last twelve months, FY = fiscal years, yoy = year-on-year, qoq = quarter-on-quarter
[2] Revenue growth decision is made by giving more weightage to long-term revenue growth (3-year average) and lesser weightage to quarterly growths
[3] Margin mentioned is average of last Q, LTM, and last 3 FY; margin increase is average of increase in last Q vs LTM and increase in last Q vs 3-FY average