Townsquare Media, Inc. operates as a media, entertainment, and digital marketing solutions company in small and mid-sized markets. The company's Local Advertising segment offers broadcast, digital, and mobile advertising services through its radio stations, Websites, radio stations online streams, and mobile applications. Its Live Events segment creates, promotes, and produces live events, including music concerts, music festivals, consumer expositions and trade shows, athletic events, and lifestyle events, as well as mobile amusement parks at fairs, and other forms of entertainment. This segment also offer event production services to third parties; and owns a proprietary ticketing platform. The company's Other Media and Entertainment segment provides digital marketing solutions, such as traditional and mobile-enabled Website development and hosting services, search engine and online directory optimization services, online reputation management, and social media management services under the Townsquare Interactive brand; e-commerce products to consumers and advertisers through its proprietary deal and auction platform; and digital advertising services. This segment also owns and operates a portfolio of 16 music and entertainment based national Websites. As of February 22, 2016, it owned and operated 309 radio stations and approximately 325 Websites in 66 markets in the United States; and approximately 550 live events the United States and Canada. The company was formerly known as Regent Communications, Inc. and changed its name to Townsquare Media, Inc. in May 2010. Townsquare Media, Inc. was founded in 1996 and is headquartered in Greenwich, Connecticut.
FINANCIAL RATIOS of Townsquare Media Cl A (TSQ)
|Price to Sales||0.4|
|Price to Book||0.6|
|Price to Tangible Book|
|Price to Cash Flow||3.6|
|Price to Free Cash Flow||5.5|
|Sales Growth Rate||17.2%|
|Sales - 3 Yr. Growth Rate||%|
|EPS Growth Rate||%|
|EPS - 3 Yr. Growth Rate||%|
|Capital Spending Gr. Rate||40%|
|Cap. Spend. - 3 Yr. Gr. Rate||16%|
|LT Debt to Equity||145%|
|Total Debt to Equity||146.8%|
|Return On Assets||3.9%|
|Ret/ On Assets - 3 Yr. Avg.||6.1%|
|Return On Total Capital||2.4%|
|Ret/ On T. Cap. - 3 Yr. Avg.||0.5%|
|Return On Equity||6.1%|
|Return On Equity - 3 Yr. Avg.||1%|
|Gross Margin - 3 Yr. Avg.||28.5%|
|EBITDA Margin - 3 Yr. Avg.||16.7%|
|Oper. Margin - 3 Yr. Avg.||12.5%|
|Pre-Tax Margin - 3 Yr. Avg.||3.4%|
|Net Profit Margin||4.4%|
|Net Profit Margin - 3 Yr. Avg.||0.7%|
|Effective Tax Rate||42.5%|
|Eff/ Tax Rate - 3 Yr. Avg.||-32.1%|
TSQ stock valuation input parameters
Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TSQ stock intrinsic value calculation we used $517 million for the last fiscal year's total revenue generated by Townsquare Media Cl A. The default revenue input number comes from 2016 income statement of Townsquare Media Cl A. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.
Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
We use three input parameters to forecast the revenue growth rate in our TSQ stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.
Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
The initial discount rate of 8.8%, whose default value for TSQ is calculated based on our internal credit rating of Townsquare Media Cl A, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Townsquare Media Cl A.
By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.
Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of TSQ stock the variable cost ratio is equal to 73.7%.
Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $64 million in the base year in the intrinsic value calculation for TSQ stock. These expenses increase with the level of inflation in subsequent years.
Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.5% for Townsquare Media Cl A.
Corporate tax rate of 27% is the nominal tax rate for Townsquare Media Cl A. In reality, companies find ways to pay much less taxes than that or not to pay them at all.
Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the TSQ stock is equal to 0%.
Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for TSQ are equal to 126.3%.
Life of production assets of 39.4 years is the average useful life of capital assets used in Townsquare Media Cl A operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.
Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for TSQ is equal to 2.5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.
Book value of equity - $389 million for Townsquare Media Cl A - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.
Shares outstanding of 17.539 million for Townsquare Media Cl A is needed to calculate the intrinsic value of one share.
Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Townsquare Media Cl A at the current share price and the inputted number of shares is $0.2 billion.