Does Take Two’s Recent 33.6% Surge Still Make Sense Given Its Valuation?

• If you are wondering whether Take Two Interactive Software is still worth buying after its huge run, you are not alone. This article is going to unpack what the current share price is really implying.
• The stock now trades around $244.53, drifting 1.7% lower over the last week but still up 4.0% over the past month and 33.6% year to date, with a 149.2% gain over three years shaping how investors see its potential and risk.
• Recent price moves have come alongside growing optimism around Take Two's deep game pipeline and its position as a key publisher behind blockbuster franchises like Grand Theft Auto and Red Dead Redemption. Investors are also weighing the impact of broader industry consolidation and evolving player spending habits, both of which can meaningfully change what looks like a fair price for the stock.
• Despite that excitement, Take Two currently scores just 0 out of 6 on our undervaluation checks. We will walk through different valuation approaches to see if the market is getting ahead of itself, and finish by looking at a more nuanced way to think about value than headline multiples alone.

Take-Two Interactive Software scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Take-Two Interactive Software Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a company is worth by forecasting the cash it can generate in the future and then discounting those cash flows back to today in dollar terms.

For Take Two Interactive Software, the model is a 2 Stage Free Cash Flow to Equity approach. The company generated about $181.9 million in free cash flow over the last twelve months, and analysts expect this to scale significantly as major titles roll out. Simply Wall St uses analyst forecasts for the next few years and then extrapolates further growth, with projected free cash flow reaching roughly $2.52 billion by 2030.

When all these future cash flows are discounted back, the DCF model arrives at an intrinsic value of about $207.43 per share. Compared with the current share price around $244.53, the stock screens as roughly 17.9% overvalued on this basis, suggesting expectations embedded in the price are already quite optimistic.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Take-Two Interactive Software may be overvalued by 17.9%. Discover 909 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Take-Two Interactive Software.

Approach 2: Take-Two Interactive Software Price vs Sales

For companies like Take Two that are investing heavily and not yet showing consistent accounting profits, the price to sales ratio is often a more reliable yardstick than earnings based multiples. Revenue is harder to manipulate than earnings and better reflects the scale of the game portfolio that will ultimately drive cash flows.

In principle, faster growth and lower perceived risk justify a higher normal price to sales multiple, while slower growth or more uncertainty should cap what investors are willing to pay per dollar of revenue. Today, Take Two trades on a price to sales multiple of about 7.26x, which is well above both the Entertainment industry average of roughly 1.33x and a peer group average of around 5.65x. This points to elevated expectations already embedded in the share price.

Simply Wall St also calculates a Fair Ratio, its proprietary estimate of what a stock price to sales multiple should be given the company’s growth outlook, margins, risk profile, industry and size. This tends to be more informative than simple peer or industry comparisons because it adjusts for the specific strengths and risks of Take Two rather than treating all publishers as interchangeable. For Take Two, the Fair Ratio stands near 4.57x, meaning the current 7.26x valuation looks stretched relative to what the fundamentals justify.

Result: OVERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1463 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Take-Two Interactive Software Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple framework on Simply Wall St's Community page. Here you tell the story behind your numbers by linking your view of a company to a specific forecast for revenue, earnings and margins, then to a Fair Value that you can compare with the current share price to decide whether to buy, hold or sell. Each Narrative updates automatically as fresh news or earnings arrive. For example, one Take Two Interactive Software investor might build a bullish Narrative around Grand Theft Auto 6, record NBA 2K engagement and a fair value near $280 per share. A more cautious investor might focus on franchise concentration, rising development costs and shifting gamer behavior to anchor a fair value closer to $150. This makes it clear how different perspectives translate into concrete, dynamic price targets you can track over time.

Do you think there's more to the story for Take-Two Interactive Software? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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