Take-Two Interactive Software Inc (TTWO, Financial) recently experienced a daily loss of 1.78%, yet over the past three months, it has seen a gain of 5.01%. With a notable Loss Per Share of $8.95, investors may wonder if the stock is fairly valued. This article delves into the valuation analysis of Take-Two Interactive Software, aiming to provide a comprehensive understanding of its current market position.
Company Introduction
Founded in 1993, Take-Two Interactive Software is a titan in the world of gaming, boasting a portfolio of acclaimed franchises such as "Grand Theft Auto," "NBA 2K," and "Civilization." With three wholly owned labels—Rockstar Games, 2K, and Zynga—the company has cemented its status as one of the largest independent video game publishers. But how does its stock measure up against its intrinsic value? With a current share price of $152.56 and a market cap of $25.90 billion, it's crucial to compare these figures to the GF Value, an estimate of fair value, to gauge whether Take-Two Interactive Software is a wise investment.
Summarize GF Value
The GF Value is a unique measure reflecting the intrinsic value of a stock, integrating historical trading multiples, a GuruFocus adjustment factor for past performance and growth, and future business performance projections. Take-Two Interactive Software (TTWO, Financial) appears to be fairly valued according to this metric. The stock's current price is in line with our calculated GF Value of $145.22, suggesting that its future returns could align closely with the company's business growth rate.
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Financial Strength
Investing in companies with robust financial strength is essential to mitigate the risk of capital loss. Take-Two Interactive Software's financial strength is evaluated at a fair level, with a cash-to-debt ratio of 0.23, which unfortunately is lower than 87.84% of its peers in the Interactive Media industry. This is a critical aspect to consider before making investment decisions in the company's stock.
Profitability and Growth
A consistent track record of profitability is a promising sign for potential investors. Take-Two Interactive Software has maintained profitability over the past decade, with a revenue of $5.40 billion in the last twelve months. However, its operating margin of -26.81% is a point of concern, ranking lower than many competitors in the Interactive Media industry. Growth is equally significant, and Take-Two Interactive Software's average annual revenue growth rate stands at 7.3%, a figure that demands attention when assessing the company's long-term value creation.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) can reveal its efficiency in generating cash flow relative to its invested capital. For Take-Two Interactive Software, the past year's ROIC of -8.08% falling below its WACC of 9.8% suggests that the company is not currently creating shareholder value, which is a crucial factor for investors to consider.
Conclusion
In conclusion, Take-Two Interactive Software (TTWO, Financial) appears to be fairly valued at its current market price. The company's financial condition and profitability are deemed fair, but its growth and value creation potential, as indicated by its ROIC and WACC comparison, may raise some concerns. For a more detailed financial analysis, interested parties are encouraged to review Take-Two Interactive Software's 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
