Take-Two Interactive Software, Inc. (TTWO) DCF Valuation & Fundamental Primer
Take-Two Interactive Software, Inc. (TTWO) currently trades at $257.31 with an enterprise value of $71.21B. Our proprietary institutional model rates Take-Two Interactive Software, Inc. at 82/100 (Grade: A · High-Quality Compounder). The current market price prices in an implied 5-year revenue CAGR of 10.9% vs. historical growth of 24.5% (Substantial Margin of Safety).
Institutional fundamental teardown of Take-Two Interactive Software, Inc. (TTWO) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
Take-Two Interactive Software, Inc. (TTWO) 3-Scenario DCF Valuation Range
Stress-test TTWO's 5-year growth, target FCF margin, WACC, terminal methodology, and SBC/dilution friction in real time.
Split between 5-Year Explicit Cash Flows and Discounted Terminal Value
2D Institutional Valuation Sensitivity Heatmap
Implied share price & upside/downside spread across 25 valuation states (Current Price: $257.31).
| WACC \ Terminal | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 8.5% | $459.30 +79% | $487.22 +89% | $519.78 +102% | $558.27 +117% | $604.46 +135% |
| 9.3% | $414.05 +61% | $436.04 +69% | $461.29 +79% | $490.58 +91% | $524.96 +104% |
| 10.0% | $376.88 +46% | $394.56 +53% | $414.59 +61% | $437.49 +70% | $463.92 +80% |
| 10.8% | $345.81 +34% | $360.27 +40% | $376.48 +46% | $394.78 +53% | $415.60 +62% |
| 11.5% | $319.48 +24% | $331.47 +29% | $344.79 +34% | $359.68 +40% | $376.42 +46% |
Institutional Software Quality Scorecard (82/100 · Grade A)
Strong fundamentals, above-average cash generation, and robust competitive positioning.
Elite deferred revenue float; FCF exceeds operating income by >20%
Elevated equity dilution; SBC consumes substantial operating cash flow
Elite Tier-1 SaaS compounder with high gross margin and superior Rule of 40
Positive net cash cushion; self-funding operations with zero insolvency risk
Core Investment Strengths & Moats
- High-grade cash conversion: FCF is 374% of EBIT driven by upfront annual collections
- Top-quartile software unit economics: 83.1% gross margin and 49.2% Rule of 40 score
- Net cash positive: $5.40B balance sheet buffer
Key Operational & Dilution Risks
- Substantial SBC dilution drag: SBC is 19.5% of revenue ($1.72B)
Reverse-DCF Solver: What Growth is Priced Into TTWO?
The current share price only requires 10.9% 5-year CAGR (26.6% dilution-adjusted), well below historical growth of 24.5%. If the company maintains baseline execution, there is asymmetric upside.
Headline Reverse-DCF ignores Stock-Based Compensation (19.5% of revenue) and annual share dilution (1.8%/yr). Accounting for both requires 26.6% 5-year revenue CAGR to justify $257.31/sh on a true per-share economic cash flow basis.
Take-Two Interactive Software, Inc. (TTWO) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $8.80B | $8.80B | $10.96B | $13.65B | $16.99B | $21.15B | $26.34B |
| Gross Profit | $7.32B | $7.32B | $9.11B | $11.34B | $14.12B | $17.58B | $21.89B |
| Operating Income (EBIT) | $581.1M | $581.1M | $723.5M | $900.7M | $1.12B | $1.40B | $1.74B |
| Stock-Based Compensation (SBC) | $1.72B | $1.72B | $2.14B | $2.66B | $3.31B | $4.12B | $5.14B |
| Unlevered Free Cash Flow (FCF) | $2.17B | $2.17B | $2.71B | $3.37B | $4.20B | $5.22B | $6.51B |
| SBC-Adjusted True Cash Flow | $457.8M | $457.8M | $570.0M | $709.7M | $883.5M | $1.10B | $1.37B |
Software & Cloud Services Peer Comparables & Rule of 40 Regression
Rule of 40 vs. EV / Revenue Multiple Regression
OLS Fit: EV/Rev = -33.3 + 0.86 × (Rule of 40) · R² = 73%Stocks below the gold regression line trade at a discount relative to their Rule of 40 compounding efficiency.
| Company | Ticker | Market Cap | TTM Revenue | Gross Margin | FCF Margin | Rule of 40 | SBC % Rev | EV / Rev |
|---|---|---|---|---|---|---|---|---|
| Take-Two Interactive Software, Inc. | TTWO | $47.54B | $8.80B | 83.1% | 24.7% | 49.2% | 19.5% | 4.8× |
| ServiceNow | NOW | $152.61B | $10.98B | 79.2% | 31.1% | 54.2% | 15.9% | 13.9× |
| Workday, Inc. | WDAY | $50.35B | $8.00B | 75.0% | 27.4% | 43.9% | 19.0% | 6.4× |
| Salesforce | CRM | $217.10B | $37.90B | 77.2% | 32.8% | 42.8% | 8.4% | 5.8× |
| Datadog | DDOG | $46.05B | $2.68B | 80.8% | 31.1% | 57.7% | 21.3% | 17.4× |
| Snowflake Inc. | SNOW | $71.79B | $3.63B | 66.5% | 25.2% | 57.7% | 40.8% | 20.0× |
| Hubspot | HUBS | $19.89B | $2.63B | 85.0% | 21.3% | 52.7% | 19.2% | 7.7× |
| Peer Cohort Median Benchmark (N=6) | 78.2% | 29.2% | 53.5% | 19.1% | 10.8× | |||
EV / Revenue Multiple Compression Stress Test
| Multiple Scenario | EV / Revenue | Implied Enterprise Value | Implied Equity Value | Implied Share Price | Delta vs Current |
|---|---|---|---|---|---|
| Current Multiple | 4.8× | $42.15B | $47.54B | $257.31 | 0.0% |
| -20% Multiple Compression | 3.8× | $33.72B | $39.12B | $211.69 | -20.0% |
| -35% Multiple Compression | 3.1× | $27.40B | $32.79B | $177.47 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $44.02B | $49.42B | $267.46 | +4.4% |
Frequently Asked Questions: Take-Two Interactive Software, Inc. (TTWO) Valuation
What is Take-Two Interactive Software, Inc. (TTWO)'s intrinsic DCF valuation and implied share price?
Based on audited SEC 10-K/10-Q filings and a 5-year 3-statement discounted cash flow (DCF) model, Take-Two Interactive Software, Inc. (TTWO) has a Base Case implied value of $414.59 per share (with a Bear Case of $182.72 and a Bull Case of $754.70), compared to its current price of $257.31. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is Take-Two Interactive Software, Inc. (TTWO)'s Rule of 40 score and Free Cash Flow margin?
Take-Two Interactive Software, Inc. achieves a Rule of 40 score of 49.2%, combining a 24.5% revenue growth run-rate with a 24.7% TTM free cash flow margin on $8.80B in trailing twelve-month revenue. In the Software & Cloud Services peer cohort, the median Rule of 40 benchmark is 53.5%.
What revenue growth rate is priced into TTWO stock according to Reverse-DCF analysis?
At $257.31 per share (Enterprise Value of $42.15B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 10.9%, compared to Take-Two Interactive Software, Inc.'s historical CAGR of 24.5%. Overall market expectations are rated as "Substantial Margin of Safety".
How does Take-Two Interactive Software, Inc. compare to Software & Cloud Services software peers?
Take-Two Interactive Software, Inc. (TTWO) earns an institutional Software Quality Score of 82/100 (Grade A — High-Quality Compounder). Across its Software & Cloud Services peer group (NOW, WDAY, CRM, DDOG, SNOW), the cohort trades at a median EV/TTM Revenue multiple of 10.8× and a median gross margin of 78.2%.
How does Stock-Based Compensation (SBC) impact Take-Two Interactive Software, Inc. (TTWO)'s valuation?
Take-Two Interactive Software, Inc. recorded $1.72B in TTM stock-based compensation (19.5% of revenue). When treating SBC as a cash-equivalent compensation expense, Take-Two Interactive Software, Inc.'s SBC-adjusted free cash flow yield is 1.0%, scoring 10/25 on our Shareholder Dilution Friction pillar.