What is TTWO's Intrinsic value?

Take-Two Interactive Software Inc (TTWO) Intrinsic Value Analysis

Executive Summary

As of June 15, 2025, Take-Two Interactive Software Inc's estimated intrinsic value ranges from $23.95 to $23.95 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Earnings Power Value $23.95 -89.6%

Is Take-Two Interactive Software Inc (TTWO) undervalued or overvalued?

With the current market price at $230.23, the stock appears to be significantly overvalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Take-Two Interactive Software Inc's intrinsic value, including:

  1. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.59 0.63
Cost of equity 6.6% 8.4%
Cost of debt 7.0% 7.0%
Tax rate 6.6% 11.4%
Debt/Equity ratio 0.09 0.09
After-tax WACC 6.6% 8.2%

Valuation Methods

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component Value
Normalized Earnings $480M
Discount Rate (WACC) 8.2% - 6.6%
Enterprise Value $5,832M - $7,324M
Net Debt $2,205M
Equity Value $3,627M - $5,119M
Outstanding Shares 183M
Fair Value $20 - $28
Selected Fair Value $23.95

Key Financial Metrics

Metric Value
Market Capitalization $42042M
Enterprise Value $44247M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 17.25
Current Dividend Yield 0.24%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.09

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Earnings Power Value 100% $2.39
Weighted Average 100% $23.95

Investment Conclusion

Based on our comprehensive valuation analysis, Take-Two Interactive Software Inc's weighted average intrinsic value is $23.95, which is approximately 89.6% below the current market price of $230.23.

Key investment considerations:

  • Strong projected earnings growth (-80% to -62% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.09)

Given these factors, we believe Take-Two Interactive Software Inc is currently significantly overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.