Take-Two Interactive Software, Inc. (NASDAQ:TTWO): What Does The Future Look Like?

As Take-Two Interactive Software, Inc. (NASDAQ:TTWO) announced its earnings release on 31 December 2018, analyst forecasts seem fairly subdued, as a 2.6% rise in profits is expected in the upcoming year, relative to the higher past 5-year average growth rate of 8.0%. Presently, with latest-twelve-month earnings at US$173m, we should see this growing to US$178m by 2020. Below is a brief commentary around Take-Two Interactive Software’s earnings outlook going forward, which may give you a sense of market sentiment for the company. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

Check out our latest analysis for Take-Two Interactive Software

Can we expect Take-Two Interactive Software to keep growing?

The longer term expectations from the 25 analysts of TTWO is tilted towards the negative sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To understand the overall trajectory of TTWO’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.

NasdaqGS:TTWO Past and Future Earnings, March 4th 2019
NasdaqGS:TTWO Past and Future Earnings, March 4th 2019

This results in an annual growth rate of -2.1% based on the most recent earnings level of US$173m to the final forecast of US$145m by 2022. However, if we exclude extraordinary items from earnings, we see that the profits is predicted to rise over time, resulting in an EPS of $3.19 in the final year of forecast compared to the current $1.57 EPS today. The bottom-line decline seems to be caused by cost growth exceeding top-line growth of 5.6% in the next three years. With this high cost growth, margins is expected to contract from 9.7% to 5.8% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Take-Two Interactive Software, I’ve put together three pertinent aspects you should look at:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is Take-Two Interactive Software worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Take-Two Interactive Software is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Take-Two Interactive Software? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.