TSQ

We rate Townsquare Media, Inc. (TSQ) as a Reduce with a composite score of 44.7/100 at a current price of $7.03. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in investment (50th percentile) and quality (46th percentile), which together account for the majority of the composite score. Offsetting weakness in momentum (30th percentile) and stability (30th percentile) tempers our overall conviction. We assign a No Moat rating (12/100), Low uncertainty, and Poor capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Townsquare Media, Inc. holds a top-quartile position (#0 of 50) within the Transportation, Communications, Electric, Gas, And Sanitary Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 44.7/100 places it at rank #2864 in our full 7,333-stock universe. At $107M in market capitalization, Townsquare Media, Inc. is a small-cap player in the Transportation, Communications, Electric, Gas, And Sanitary Services space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue contraction of -10% combined with momentum at the 30th percentile paints a cautious picture of the near-term business outlook. The market appears to be pricing in continued challenges, and a catalyst for reversal is not clearly visible from current data.

The margin cascade tells an important story: gross margins of 26% (-29.3pp vs sector) narrow to operating margins of 11% (-6.5pp vs sector) and net margins of 1.2%, yielding a gross-to-net conversion rate of 5%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $7.03, Townsquare Media, Inc. is trading at a premium to fundamental value. Our value factor score of 38/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The premium valuation implies the market is pricing in significant future growth or quality improvements that are not yet fully reflected in current fundamentals.

The stock currently trades at a P/E of 18.5x (roughly in line with the sector median of 16.9x), EV/EBITDA of 11.3x (at a premium), P/S of 0.3x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a Low uncertainty rating to Townsquare Media, Inc.. The company exhibits strong financial stability with a beta of 0.76, and a stability factor in the 30th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: below-average price stability (30th percentile). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 30th percentile and quality factor at the 46th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: a 12.19% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Townsquare Media, Inc.'s capital allocation as Poor. Key concerns include low returns on equity (-17.2%), weak asset returns (ROA 1.2%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Townsquare Media, Inc. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, Townsquare Media, Inc. receives a Reduce rating with a composite score of 44.7/100 (rank #2864 of 7,333). Our quantitative framework assigns a No Moat (12/100, trend: stable), Low uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 39/100.

Our analysis does not support a constructive view on Townsquare Media, Inc. at this time. The combination of limited competitive advantages, low uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.