Benign Growth For Townsquare Media, Inc. (NYSE:TSQ) Underpins Its Share Price

You may think that with a price-to-sales (or "P/S") ratio of 0.3x Townsquare Media, Inc. (NYSE:TSQ) is a stock worth checking out, seeing as almost half of all the Media companies in the United States have P/S ratios greater than 1.1x and even P/S higher than 4x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

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Check out our latest analysis for Townsquare Media

How Has Townsquare Media Performed Recently?

While the industry has experienced revenue growth lately, Townsquare Media's revenue has gone into reverse gear, which is not great. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

Want the full picture on analyst estimates for the company? Then our free report on Townsquare Media will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Townsquare Media?

Townsquare Media's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. That's essentially a continuation of what we've seen over the last three years, as its revenue growth has been virtually non-existent for that entire period. Accordingly, shareholders probably wouldn't have been satisfied with the complete absence of medium-term growth.

Looking ahead now, revenue is anticipated to slump, contracting by 0.9% during the coming year according to the two analysts following the company. Meanwhile, the broader industry is forecast to expand by 2.2%, which paints a poor picture.

With this in consideration, we find it intriguing that Townsquare Media's P/S is closely matching its industry peers. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

What We Can Learn From Townsquare Media's P/S?

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of Townsquare Media's analyst forecasts revealed that its outlook for shrinking revenue is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for Townsquare Media (3 don't sit too well with us) you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.