Take-Two Interactive (TTWO:NAS) Fundamental Valuation Report

Fundamental Valuation Report

Take-Two Interactive(TTWO:NAS)

Technology:Electronic Gaming & Multimedia

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

Close Price/Date
$104.98 (USD) 14/01/2019

Weighted Valuation
$131.27 (USD)

Overall Rating
Undervalued by 25.0%

Valuation Models Analyst Consensus: $147.00 (USD)
(in order of importance) Discounted Cash Flow: $117.81 (USD)
Adjusted Book Value: $111.00 (USD)
Valuation Methods This company is:
Cash Flow: Undervalued on a Cash Flow Valuation
Comparable Company: Overvalued on a Comparable Valuation
Asset: Undervalued on an Asset Valuation

Company Overview (TTWO:NAS USD)

Price 104.98
Range 104.37 – 108.50
52 week 94.63 – 137.99
Open 108.29
Vol / Avg. 4.5M/2.25M
Mkt cap 11.95B
P/E 82.51
Div/yield 0.00/0.00
EPS 1.54
Shares 113.87M
Beta 1.09

Company Description

Found in 1993, Take-Two consists of two wholly owned labels, Rockstar Games and 2K. The firm is one of the world’s largest independent video game publishers on consoles, PCs, smartphones, and tablets. Take-Two’s franchise portfolio is headlined by "Grand Theft Auto" (220 million units sold) and contains other well-known titles such as "NBA 2K," "Civilization," "Borderlands," "Bioshock," and "Xcom."

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for TTWO:NAS

Using a discounted cash flow model we generated an intrinsic value of $117.81 (USD) for TTWO:NAS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

TTWO:NAS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $117.81 1% 5% 1% 5%
WACC (or Ke) 10.39 $138.10 $102.39
Terminal Growth Rate 3.00 $104.30 $135.56
Tax Rate 0.27 $126.13 $109.49
Cash Flow 1,656,343,000 $111.63 $123.99
Capital Expenditures -39,863,600 $117.67 $117.96
Long Term Debt 511,636,000 $118.04 $117.59

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $67.25 (USD) for TTWO:NAS. We also generated a valuation of $83.77 (USD) using other metrics and comparables.
The comparable companies were Activision Blizzard (ATVI:NAS), Electronic Arts (EA:NAS) and Zynga (ZNGA:NAS).

Company TTWO:NAS End Date Value
Earnings/Share $1.85 (USD)
Book Value/Share $17.08 (USD)
Sales/Share $15.62 (USD)
Cash Flow/Share $0.48 (USD)
EBITDA/Share $2.55 (USD)
Price Based on Comps Adjustment Factor (%)
$134.67 (USD) 0.0
$56.42 (USD) 23.2
$71.27 (USD) -36.6
$10.90 (USD) 28.4
$72.81 (USD) 0.0
TTWO:NAS Ratios Used Average Values ATVI:NAS EA:NAS ZNGA:NAS
55.64 PE Ratio 72.80 62.09 25.29 131.00
6.03 PB Ratio 3.30 3.33 4.48 2.10
6.59 PS Ratio 4.56 5.02 4.74 3.94
214.89 PCF Ratio 22.89 18.43 16.78 33.47
33.39 EV to EBITDA 28.60 14.16 13.33 58.32

Multiples

Using a multiples approach we generated a valuation of  $76.67 (USD) for TTWO:NAS

Company TTWO:NAS End Date Value
Earnings/Share $1.85 (USD)
Book Value/Share $17.08 (USD)
Sales/Share $15.62 (USD)
Cash Flow/Share $0.48 (USD)
EBITDA/Share $2.55 (USD)
Price Based on Comps Adjustment Factor
$172.33 (USD) 0
$113.65 (USD) 0
$45.58 (USD) 0
$6.80 (USD) 0
$45.00 (USD) 0
Ratios Ratio Average
PE Ratio 93.15
PB Ratio 6.66
PS Ratio 2.92
PCF Ratio 14.19
EV to EBITDA 17.68

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  TTWO:NAS for the last 10 years was  6.51

We ran the Adjusted Book Value for  TTWO:NAS and generated a book value of  $17.05 (USD)
By multiplying these we get an adjusted valuation of  $111.00 (USD)

Analyst Data

In the Stockcalc database there are 4 analysts that provide a valuation for TTWO:NAS. The 4 analysts have a concensus valuation for TTWO:NAS for 2020 of $147.00 (USD).

TTWO:NAS Take-Two Interactive

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
3 2 0 4.2000 Outperform 2019-1-10

Current Price: 104.98 USD

Analyst Consensus
USD Millions 2019 2020 2021
Mean EPS 4.65 4.91 8.62
# EPS Analysts 5 5 2
Mean Revenue 2,910.00 2,853.00 4,375.50
# Revenue Analysts 4 4 2
Mean Target Price 147.00
Mean Cash Flow 6.47 5.82 9.39
Mean EBITDA 540.10 773.90 1,608.10
Mean Net Income 566.10 645.00 1,034.70
Mean Debt Outstanding -2,522.40 -3,117.90 -4,211.60
Mean Tax Rate 20.00
Mean Growth Rate 12.32
Mean Capital Expenditure 49.30 47.50 53.80

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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