DCF Studio

    TTWO · NMS · Communication Services

    Take-Two Interactive Software, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 34.67

    Market price

    USD 205.45

    Implied upside

    -83.1%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Current EV/EBITDA of 33.7x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 34.67-83.1%
    Exit multiple
    USD 93.12-54.7%
    Market price
    USD 205.45

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m288m576mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 7.2bnUSD 7.7bnUSD 8.3bnUSD 8.9bnUSD 9.6bn+7.6%
    EBITUSD -1.0bnUSD -1.1bnUSD -1.2bnUSD -1.3bnUSD -1.4bn-7.6%
    NOPATUSD -815.1mUSD -876.7mUSD -942.9mUSD -1.0bnUSD -1.1bn-7.6%
    Add depreciation & amortisationUSD 2.0bnUSD 2.1bnUSD 2.3bnUSD 2.4bnUSD 2.6bn+7.6%
    Less capital expenditureUSD -213.3mUSD -229.4mUSD -246.8mUSD -265.4mUSD -285.5m+7.6%
    Less increase in working capitalUSD -495.2mUSD -532.6mUSD -572.9mUSD -616.2mUSD -662.7m+7.6%
    Free cashflow to firmUSD 430.2mUSD 462.7mUSD 497.7mUSD 535.3mUSD 575.7m+7.6%
    Discount factor0.95380.86780.78950.71830.6535-
    Present valueUSD 410.3mUSD 401.5mUSD 392.9mUSD 384.5mUSD 376.2m-2.1%
    Present Value Of The ForecastUSD 2.0bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.977Reported 0.966, pulled toward 1.0 (Blume)
    Cost of equity10.37%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 38.4bn92.8% of capital
    Total debtUSD 3.0bn7.2% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC9.91%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 34.67

    73% of EV

    Forecast FCFF, final year
    USD 575.7m
    Capex at depreciation, working capital in reinvestment
    USD 796.0m
    Less reinvestment at g/ROIC (25.2% of NOPAT)
    USD -200.7m
    Capitalised
    USD 595.2m
    ROIC (WACC floor)
    9.9%
    Terminal value, undiscounted
    USD 8.2bn
    Terminal value, discounted
    USD 5.4bn
    Enterprise value
    USD 7.3bn
    Less net debt
    USD 969.0m
    Equity value
    USD 6.4bn

    Exit at 20.0x EBITDA

    Value per shareUSD 93.12

    89% of EV

    Terminal value, undiscounted
    USD 24.7bn
    Terminal value, discounted
    USD 16.1bn
    Enterprise value
    USD 18.1bn
    Less net debt
    USD 969.0m
    Equity value
    USD 17.1bn

    Spread between methods: 91%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    7.91%45.3245.5245.7145.9046.10
    8.91%39.2339.3939.5639.7239.89
    9.91%34.3834.5234.6734.8134.95
    10.91%30.4430.5730.6930.8130.94
    11.91%27.1827.2927.4027.5127.62

    Outlined: this model. Green text: above today's price of 205.45. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    EBIT margin-14.4%26.4%+40.8pp
    Discount rate9.9%2.7%-7.2pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.