Intrinsic value of Take-Two Interactive Software - TTWO

Previous Close

$102.96

  Intrinsic Value

$231.13

stock screener

  Rating & Target

str. buy

+124%

  Value-price divergence*

-123%

Previous close

$102.96

 
Intrinsic value

$231.13

 
Up/down potential

+124%

 
Rating

str. buy

 
Value-price divergence*

-123%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of TTWO stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2017), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 10.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  25.88
  34.00
  31.10
  28.49
  26.14
  24.03
  22.12
  20.41
  18.87
  17.48
  16.24
  15.11
  14.10
  13.19
  12.37
  11.63
  10.97
  10.37
  9.84
  9.35
  8.92
  8.53
  8.17
  7.86
  7.57
  7.31
  7.08
  6.87
  6.69
  6.52
  6.37
Revenue, $m
  1,780
  2,385
  3,127
  4,018
  5,068
  6,286
  7,677
  9,244
  10,988
  12,909
  15,005
  17,272
  19,708
  22,307
  25,067
  27,983
  31,053
  34,275
  37,646
  41,167
  44,838
  48,661
  52,638
  56,773
  61,071
  65,537
  70,179
  75,002
  80,017
  85,233
  90,659
Variable operating expenses, $m
 
  1,703
  2,221
  2,844
  3,578
  4,429
  5,401
  6,496
  7,715
  9,057
  10,522
  12,070
  13,772
  15,589
  17,518
  19,556
  21,701
  23,952
  26,308
  28,769
  31,334
  34,006
  36,785
  39,675
  42,678
  45,800
  49,043
  52,414
  55,919
  59,563
  63,355
Fixed operating expenses, $m
 
  429
  440
  451
  462
  474
  486
  498
  511
  523
  536
  550
  564
  578
  592
  607
  622
  638
  653
  670
  687
  704
  721
  739
  758
  777
  796
  816
  837
  857
  879
Total operating expenses, $m
  1,688
  2,132
  2,661
  3,295
  4,040
  4,903
  5,887
  6,994
  8,226
  9,580
  11,058
  12,620
  14,336
  16,167
  18,110
  20,163
  22,323
  24,590
  26,961
  29,439
  32,021
  34,710
  37,506
  40,414
  43,436
  46,577
  49,839
  53,230
  56,756
  60,420
  64,234
Operating income, $m
  91
  253
  466
  723
  1,028
  1,383
  1,790
  2,250
  2,763
  3,329
  3,947
  4,652
  5,372
  6,141
  6,957
  7,821
  8,730
  9,685
  10,684
  11,728
  12,817
  13,951
  15,132
  16,359
  17,635
  18,961
  20,339
  21,772
  23,262
  24,812
  26,425
EBITDA, $m
  351
  403
  652
  952
  1,307
  1,721
  2,195
  2,730
  3,326
  3,984
  4,703
  5,481
  6,318
  7,211
  8,161
  9,164
  10,221
  11,330
  12,491
  13,704
  14,969
  16,287
  17,658
  19,084
  20,566
  22,107
  23,708
  25,372
  27,103
  28,903
  30,776
Interest expense (income), $m
  8
  9
  8
  31
  59
  91
  129
  172
  221
  275
  335
  400
  471
  547
  627
  713
  804
  899
  1,000
  1,104
  1,214
  1,328
  1,447
  1,571
  1,699
  1,833
  1,972
  2,116
  2,266
  2,422
  2,584
Earnings before tax, $m
  77
  244
  458
  692
  969
  1,292
  1,661
  2,077
  2,542
  3,053
  3,612
  4,252
  4,901
  5,594
  6,330
  7,108
  7,926
  8,786
  9,685
  10,624
  11,603
  12,623
  13,685
  14,788
  15,936
  17,128
  18,368
  19,656
  20,996
  22,390
  23,840
Tax expense, $m
  10
  66
  124
  187
  262
  349
  448
  561
  686
  824
  975
  1,148
  1,323
  1,510
  1,709
  1,919
  2,140
  2,372
  2,615
  2,868
  3,133
  3,408
  3,695
  3,993
  4,303
  4,625
  4,959
  5,307
  5,669
  6,045
  6,437
Net income, $m
  67
  178
  334
  505
  708
  943
  1,212
  1,517
  1,855
  2,229
  2,636
  3,104
  3,578
  4,084
  4,621
  5,189
  5,786
  6,413
  7,070
  7,756
  8,470
  9,215
  9,990
  10,795
  11,633
  12,504
  13,408
  14,349
  15,327
  16,345
  17,404

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,392
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  3,149
  2,355
  3,087
  3,966
  5,003
  6,205
  7,578
  9,125
  10,847
  12,743
  14,812
  17,051
  19,455
  22,021
  24,745
  27,624
  30,655
  33,835
  37,163
  40,639
  44,263
  48,036
  51,962
  56,045
  60,287
  64,696
  69,278
  74,040
  78,991
  84,139
  89,495
Adjusted assets (=assets-cash), $m
  1,757
  2,355
  3,087
  3,966
  5,003
  6,205
  7,578
  9,125
  10,847
  12,743
  14,812
  17,051
  19,455
  22,021
  24,745
  27,624
  30,655
  33,835
  37,163
  40,639
  44,263
  48,036
  51,962
  56,045
  60,287
  64,696
  69,278
  74,040
  78,991
  84,139
  89,495
Revenue / Adjusted assets
  1.013
  1.013
  1.013
  1.013
  1.013
  1.013
  1.013
  1.013
  1.013
  1.013
  1.013
  1.013
  1.013
  1.013
  1.013
  1.013
  1.013
  1.013
  1.013
  1.013
  1.013
  1.013
  1.013
  1.013
  1.013
  1.013
  1.013
  1.013
  1.013
  1.013
  1.013
Average production assets, $m
  428
  572
  750
  964
  1,216
  1,509
  1,842
  2,218
  2,637
  3,098
  3,601
  4,145
  4,730
  5,354
  6,016
  6,716
  7,453
  8,226
  9,035
  9,880
  10,761
  11,679
  12,633
  13,626
  14,657
  15,729
  16,843
  18,001
  19,204
  20,456
  21,758
Working capital, $m
  509
  -1,183
  -1,551
  -1,993
  -2,514
  -3,118
  -3,808
  -4,585
  -5,450
  -6,403
  -7,442
  -8,567
  -9,775
  -11,064
  -12,433
  -13,880
  -15,402
  -17,000
  -18,672
  -20,419
  -22,240
  -24,136
  -26,108
  -28,159
  -30,291
  -32,506
  -34,809
  -37,201
  -39,689
  -42,275
  -44,967
Total debt, $m
  252
  226
  885
  1,677
  2,610
  3,692
  4,927
  6,319
  7,869
  9,576
  11,438
  13,453
  15,616
  17,926
  20,378
  22,969
  25,696
  28,558
  31,554
  34,682
  37,943
  41,340
  44,873
  48,547
  52,366
  56,334
  60,457
  64,743
  69,198
  73,832
  78,653
Total liabilities, $m
  2,145
  2,119
  2,778
  3,570
  4,503
  5,585
  6,820
  8,212
  9,762
  11,469
  13,331
  15,346
  17,509
  19,819
  22,271
  24,862
  27,589
  30,451
  33,447
  36,575
  39,836
  43,233
  46,766
  50,440
  54,259
  58,227
  62,350
  66,636
  71,091
  75,725
  80,546
Total equity, $m
  1,004
  235
  309
  397
  500
  621
  758
  912
  1,085
  1,274
  1,481
  1,705
  1,945
  2,202
  2,475
  2,762
  3,065
  3,383
  3,716
  4,064
  4,426
  4,804
  5,196
  5,604
  6,029
  6,470
  6,928
  7,404
  7,899
  8,414
  8,950
Total liabilities and equity, $m
  3,149
  2,354
  3,087
  3,967
  5,003
  6,206
  7,578
  9,124
  10,847
  12,743
  14,812
  17,051
  19,454
  22,021
  24,746
  27,624
  30,654
  33,834
  37,163
  40,639
  44,262
  48,037
  51,962
  56,044
  60,288
  64,697
  69,278
  74,040
  78,990
  84,139
  89,496
Debt-to-equity ratio
  0.251
  0.960
  2.870
  4.230
  5.220
  5.950
  6.500
  6.930
  7.250
  7.510
  7.720
  7.890
  8.030
  8.140
  8.240
  8.310
  8.380
  8.440
  8.490
  8.530
  8.570
  8.610
  8.640
  8.660
  8.690
  8.710
  8.730
  8.740
  8.760
  8.780
  8.790
Adjusted equity ratio
  -0.221
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  67
  178
  334
  505
  708
  943
  1,212
  1,517
  1,855
  2,229
  2,636
  3,104
  3,578
  4,084
  4,621
  5,189
  5,786
  6,413
  7,070
  7,756
  8,470
  9,215
  9,990
  10,795
  11,633
  12,504
  13,408
  14,349
  15,327
  16,345
  17,404
Depreciation, amort., depletion, $m
  260
  150
  186
  229
  279
  338
  404
  480
  563
  656
  756
  829
  946
  1,071
  1,203
  1,343
  1,491
  1,645
  1,807
  1,976
  2,152
  2,336
  2,527
  2,725
  2,931
  3,146
  3,369
  3,600
  3,841
  4,091
  4,352
Funds from operations, $m
  233
  329
  520
  734
  987
  1,281
  1,617
  1,996
  2,419
  2,884
  3,393
  3,933
  4,524
  5,154
  5,824
  6,532
  7,277
  8,059
  8,877
  9,732
  10,623
  11,551
  12,516
  13,521
  14,564
  15,649
  16,777
  17,949
  19,168
  20,436
  21,755
Change in working capital, $m
  -98
  -300
  -368
  -442
  -521
  -604
  -690
  -777
  -865
  -953
  -1,040
  -1,125
  -1,208
  -1,289
  -1,369
  -1,447
  -1,523
  -1,598
  -1,672
  -1,746
  -1,821
  -1,896
  -1,973
  -2,051
  -2,132
  -2,215
  -2,302
  -2,393
  -2,487
  -2,587
  -2,691
Cash from operations, $m
  331
  629
  888
  1,176
  1,508
  1,885
  2,307
  2,773
  3,284
  3,837
  4,432
  5,058
  5,732
  6,444
  7,193
  7,978
  8,800
  9,656
  10,549
  11,478
  12,444
  13,447
  14,489
  15,572
  16,696
  17,865
  19,079
  20,342
  21,655
  23,023
  24,446
Maintenance CAPEX, $m
  0
  -86
  -114
  -150
  -193
  -243
  -302
  -368
  -444
  -527
  -620
  -720
  -829
  -946
  -1,071
  -1,203
  -1,343
  -1,491
  -1,645
  -1,807
  -1,976
  -2,152
  -2,336
  -2,527
  -2,725
  -2,931
  -3,146
  -3,369
  -3,600
  -3,841
  -4,091
New CAPEX, $m
  -21
  -144
  -178
  -214
  -252
  -292
  -334
  -376
  -419
  -461
  -503
  -544
  -585
  -624
  -662
  -700
  -737
  -773
  -809
  -845
  -881
  -917
  -955
  -992
  -1,031
  -1,072
  -1,114
  -1,158
  -1,204
  -1,252
  -1,302
Cash from investing activities, $m
  -129
  -230
  -292
  -364
  -445
  -535
  -636
  -744
  -863
  -988
  -1,123
  -1,264
  -1,414
  -1,570
  -1,733
  -1,903
  -2,080
  -2,264
  -2,454
  -2,652
  -2,857
  -3,069
  -3,291
  -3,519
  -3,756
  -4,003
  -4,260
  -4,527
  -4,804
  -5,093
  -5,393
Free cash flow, $m
  202
  399
  596
  812
  1,063
  1,349
  1,671
  2,029
  2,422
  2,849
  3,309
  3,793
  4,318
  4,874
  5,460
  6,075
  6,720
  7,393
  8,095
  8,826
  9,586
  10,377
  11,199
  12,053
  12,940
  13,861
  14,819
  15,816
  16,852
  17,930
  19,053
Issuance/(repayment) of debt, $m
  0
  -26
  659
  792
  933
  1,082
  1,236
  1,392
  1,550
  1,707
  1,862
  2,015
  2,164
  2,310
  2,452
  2,591
  2,728
  2,862
  2,995
  3,128
  3,262
  3,396
  3,533
  3,674
  3,818
  3,968
  4,124
  4,286
  4,456
  4,634
  4,821
Issuance/(repurchase) of shares, $m
  0
  445
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -50
  419
  659
  792
  933
  1,082
  1,236
  1,392
  1,550
  1,707
  1,862
  2,015
  2,164
  2,310
  2,452
  2,591
  2,728
  2,862
  2,995
  3,128
  3,262
  3,396
  3,533
  3,674
  3,818
  3,968
  4,124
  4,286
  4,456
  4,634
  4,821
Total cash flow (excl. dividends), $m
  145
  818
  1,255
  1,603
  1,996
  2,431
  2,907
  3,421
  3,971
  4,556
  5,171
  5,808
  6,482
  7,183
  7,912
  8,666
  9,447
  10,255
  11,090
  11,954
  12,848
  13,774
  14,732
  15,726
  16,758
  17,829
  18,943
  20,101
  21,307
  22,564
  23,874
Retained Cash Flow (-), $m
  -423
  -623
  -73
  -88
  -104
  -120
  -137
  -155
  -172
  -190
  -207
  -224
  -240
  -257
  -272
  -288
  -303
  -318
  -333
  -348
  -362
  -377
  -393
  -408
  -424
  -441
  -458
  -476
  -495
  -515
  -536
Prev. year cash balance distribution, $m
 
  1,392
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  1,587
  1,181
  1,515
  1,892
  2,311
  2,769
  3,266
  3,799
  4,366
  4,965
  5,584
  6,241
  6,927
  7,639
  8,378
  9,144
  9,937
  10,757
  11,606
  12,486
  13,396
  14,340
  15,318
  16,334
  17,388
  18,485
  19,625
  20,812
  22,049
  23,338
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  1,521
  1,082
  1,319
  1,558
  1,791
  2,010
  2,207
  2,375
  2,508
  2,603
  2,652
  2,663
  2,634
  2,565
  2,460
  2,324
  2,162
  1,981
  1,787
  1,587
  1,386
  1,190
  1,004
  832
  676
  539
  421
  322
  241
  176
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Take-Two Interactive Software, Inc. is a developer, publisher and marketer of entertainment for consumers around the world. The Company develops and publishes products through its labels, Rockstar Games and 2K. It operates through publishing segment. It has a portfolio of software content for the hardware platforms in a range of genres, including action, adventure, family/casual, racing, role-playing, shooter, sports and strategy, which it distributes across the world. The Company's products are designed for console gaming systems, such as PlayStation 3 and PlayStation 4; Xbox 360 and Xbox One, and personal computers, including smartphones and tablets. Rockstar Games is the developer and publisher of Grand Theft Auto, as well as other franchises, including L.A. Noire, Max Payne, Midnight Club and Red Dead. 2K publishes owned and licensed titles across a range of genres. It has internal development studios in Canada, China, Czech Republic, the United Kingdom and the United States.

FINANCIAL RATIOS  of  Take-Two Interactive Software (TTWO)

Valuation Ratios
P/E Ratio 157.7
Price to Sales 5.9
Price to Book 10.5
Price to Tangible Book
Price to Cash Flow 31.9
Price to Free Cash Flow 34.1
Growth Rates
Sales Growth Rate 25.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -43.2%
Cap. Spend. - 3 Yr. Gr. Rate -6.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0.3
LT Debt to Equity 25.1%
Total Debt to Equity 25.1%
Interest Coverage 11
Management Effectiveness
Return On Assets 2.6%
Ret/ On Assets - 3 Yr. Avg. -3.7%
Return On Total Capital 5.7%
Ret/ On T. Cap. - 3 Yr. Avg. -6.5%
Return On Equity 8.5%
Return On Equity - 3 Yr. Avg. -11.3%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 42.5%
Gross Margin - 3 Yr. Avg. 37.2%
EBITDA Margin 19.4%
EBITDA Margin - 3 Yr. Avg. 6.2%
Operating Margin 5.2%
Oper. Margin - 3 Yr. Avg. -6.5%
Pre-Tax Margin 4.3%
Pre-Tax Margin - 3 Yr. Avg. -7.9%
Net Profit Margin 3.8%
Net Profit Margin - 3 Yr. Avg. -7.5%
Effective Tax Rate 13%
Eff/ Tax Rate - 3 Yr. Avg. 29.9%
Payout Ratio 0%

TTWO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TTWO stock intrinsic value calculation we used $1780 million for the last fiscal year's total revenue generated by Take-Two Interactive Software. The default revenue input number comes from 2017 income statement of Take-Two Interactive Software. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our TTWO stock valuation model: a) initial revenue growth rate of 34% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for TTWO is calculated based on our internal credit rating of Take-Two Interactive Software, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Take-Two Interactive Software.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of TTWO stock the variable cost ratio is equal to 71.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $419 million in the base year in the intrinsic value calculation for TTWO stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Take-Two Interactive Software.

Corporate tax rate of 27% is the nominal tax rate for Take-Two Interactive Software. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the TTWO stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for TTWO are equal to 24%.

Life of production assets of 2.8 years is the average useful life of capital assets used in Take-Two Interactive Software operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for TTWO is equal to -49.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1004 million for Take-Two Interactive Software - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 105.875 million for Take-Two Interactive Software is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Take-Two Interactive Software at the current share price and the inputted number of shares is $10.9 billion.

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Financial statements of TTWO
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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