Take-Two Interactive Software Inc (TTWO)

Conclusion

Take-Two Interactive Software develops and publishes video games, including the Grand Theft Auto, Red Dead Redemption and NBA 2K franchises. At 207.40 USD on 2026-11-09, the company has a market capitalisation of 38.8 billion USD and an enterprise value of 39.9 billion USD.

The verdict is overvalued. The fair value band runs from 92.89 to 139.33 USD with a midpoint of 116.11 USD, which gives a margin of safety of -44.0% at the current price. Today's EV/EBITDA of 40.46 compares with a historical median of 22.37, price to free cash flow is 118.92 against a median of 28.50, and price to book is 10.75 against 6.23. The fair value from historical multiples is 116.11 USD. The discounted cash flow value per share is not available in this analysis, and the growth implied by the price (reverse DCF) is not available either. For comparison, revenue grew at a compound rate of 14.6% over five years and 7.6% over three.

What holds the case up is the balance sheet and the revenue record: an Altman Z-score of 3.86, net debt to EBITDA of 1.13x, and revenue growth in 9 of 10 comparable years. What would break it is the return on capital and the cash flow. ROIC is -1.3% against a WACC of 9.1%, interest coverage is -0.83, and the share count has risen at a compound rate of 9.9% over five years.

Financial health

Financial strength is yellow: the Altman Z-score of 3.86 and net debt to EBITDA of 1.13x support it, while interest coverage of -0.83 pulls it down. The current ratio is 1.06 and the quick ratio 0.87, with debt to equity at 0.82. Interest coverage is negative, so operating profit does not cover interest expense over the last twelve months. The Altman Z-score of 3.86 sits in the safe zone, although that model was designed for manufacturers and Take-Two is not one. Insolvency risk: low, about 1.2% by the estimate of the Ohlson model over one to two years. The company's cash and debt position is solid on paper, but its operating earnings are currently too weak to service its interest.

Earnings quality

Earnings quality is yellow. Piotroski passes 7 of 9 tests, and the company beat estimates in 7 of the last 8 quarters, with an average surprise of 70.5%. Against that, the accrual ratio is -0.0994, stock-based compensation is 5.2% of revenue, and free cash flow after stock-based compensation was -24.5 million USD over the last twelve months. Share count has grown at a compound rate of 9.9% over five years, which means dilution rather than buybacks. Free cash flow conversion for the trailing twelve months and five years, and the Beneish M-score, are not available. Estimate revisions are mixed: the current-year estimate fell 16.3% over 90 days, while the next-year estimate rose 4.0%, with expected growth of 48.3%.

Profitability

Profitability is red. Gross margin of 56.0% is above its historical median of 50.0%, but operating margin of -2.4% compares with a median of 6.4%, and net margin of -4.8% compares with 6.7%. Return on invested capital is -1.3% against a WACC of 9.1%, so the company is currently destroying value, with ROIC minus WACC at -10.4%. The five-year median ROIC is -8.2%. Return on equity is -8.9%. The DuPont split shows a net margin of -4.5%, asset turnover of 0.71 and an equity multiplier of 2.67, so leverage is amplifying a loss-making return rather than flattering a profitable one. Operating margin stability is 15.96 on the company's measure.

Growth

Growth is green. Revenue compounded at 7.6% over three years, 14.6% over five years and 16.8% over ten years. Revenue grew in 9 of the 10 comparable years. Free cash flow per share has moved the other way: its five-year compound rate is -19.3%, and its ten-year rate is -0.8%. Earnings per share growth is not available, because the company's earnings are currently negative. The top-line record is strong, but it has not yet translated into cash flow per share for shareholders.

Valuation

Valuation is red. Current multiples sit above their historical medians: EV/EBITDA of 40.46 against 22.37 (a premium of 80.9%), price to free cash flow of 118.92 against 28.50 (a premium of 317.3%), price to sales of 5.80 against 5.19 (a premium of 11.7%), and price to book of 10.75 against 6.23 (a premium of 72.5%). The earnings yield is -0.8% and the free cash flow yield is 0.8%. The discounted cash flow uses a discount rate of 9.48% and a terminal growth rate of 2.5%, but its per-share value is not available. The fair value band of 92.89 to 139.33 USD is built on fixed assumptions, not a price target. The company pays no dividend.

Risks

The weak numbers each carry a specific risk. Negative interest coverage means that earnings must improve before the debt load becomes comfortable. A return on invested capital below the cost of capital means that growth currently adds little value. Free cash flow after stock-based compensation is negative, and a 9.9% annual rise in share count dilutes existing holders each year. The price implies a growth rate that the analysis cannot quantify, because the reverse DCF is not available. The discounted cash flow value per share is also not available. The analysis does not include a debt maturity schedule or a revenue breakdown by segment, and the tax rate of 21% is an assumption. The historical multiples are based on few data points, and the Altman model does not fit a company that is not a manufacturer.