Stock Analysis

Townsquare Media, Inc.'s (NYSE:TSQ) About To Shift From Loss To Profit

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NYSE:TSQ
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With the business potentially at an important milestone, we thought we'd take a closer look at Townsquare Media, Inc.'s (NYSE:TSQ) future prospects. Townsquare Media, Inc. operates as a radio, digital media, entertainment, and digital marketing solutions company in small and mid-sized markets. The US$162m market-cap company announced a latest loss of US$82m on 31 December 2020 for its most recent financial year result. Many investors are wondering about the rate at which Townsquare Media will turn a profit, with the big question being “when will the company breakeven?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

Check out our latest analysis for Townsquare Media

Townsquare Media is bordering on breakeven, according to the 3 American Media analysts. They expect the company to post a final loss in 2020, before turning a profit of US$11m in 2021. Therefore, the company is expected to breakeven roughly a year from now or less! How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 103% year-on-year, on average, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

earnings-per-share-growth
NYSE:TSQ Earnings Per Share Growth April 14th 2021

We're not going to go through company-specific developments for Townsquare Media given that this is a high-level summary, but, take into account that by and large a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

Before we wrap up, there’s one issue worth mentioning. Townsquare Media currently has a debt-to-equity ratio of over 2x. Typically, debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Townsquare Media, so if you are interested in understanding the company at a deeper level, take a look at Townsquare Media's company page on Simply Wall St. We've also compiled a list of pertinent aspects you should further research:

  1. Valuation: What is Townsquare Media worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Townsquare Media is currently mispriced by the market.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Townsquare Media’s board and the CEO’s background.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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What are the risks and opportunities for Townsquare Media?

Townsquare Media, Inc. operates as a digital media and marketing solutions company in small and medium-sized businesses.

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Rewards

  • Trading at 74.7% below our estimate of its fair value

  • Earnings are forecast to grow 38.6% per year

Risks

  • Interest payments are not well covered by earnings

  • Shareholders have been diluted in the past year

  • Profit margins (2.3%) are lower than last year (4.7%)

  • Large one-off items impacting financial results

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