Take-Two Interactive (TTWO)

The value today by multiples ($155) is below the market price ($214). The present-value lens does not apply to this company, so the contrast between methods is unavailable.

Today — expensive, no margin of safety: at $214 trades ~38.3% above its value discounted to today (~$155); the expected return does not even reach the risk-free rate (4.5%).

At 5 years — Sobrevalorado: the expected total return is negative — the price already discounts a demanding scenario that, if not met, results in a loss.

The bridge: the return at 5 years falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$96.

Educational / informational. Does not constitute investment advice.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). The flow is returned almost in full (dividend + buyback) or redeployed into the operation, so that EV stays roughly flat and multiples compress because the metric grows, not because of cash accumulation. The valuation is done on Utilidad neta comparable (P/E). In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

The year-0 base (TTM through Jun 30, 2026) carries negative net income and operating income: $6,686.5 million of revenue against operating income of -$161.3 million and net income of -$320.4 million. The cause is not a deteriorating business but two overlapping charges, both cited from the 10-K and the Aug 7, 2026 8-K: (1) amortization of intangibles acquired in the Zynga purchase (May 2022, about $12.7 billion) runs at roughly $600-620 million a year, a non-economic (non-cash) charge that the company itself breaks out in its GAAP-to-non-GAAP reconciliation; and (2) pre-launch marketing and development investment for Grand Theft Auto VI (Nov 19, 2026, within fiscal year 2027), the central catalyst of the thesis. The path starts from current guidance (the Aug 7, 2026 8-K, which reiterates the range given in June): GAAP net revenue of $7,900-8,100 million and diluted EPS of $0.55-0.75 for fiscal 2027 (year+1), with Net Bookings of $8.0-8.2 billion — the first guidance to already incorporate roughly 4.4 months of Grand Theft Auto VI (from launch to fiscal year-end, Mar 31, 2027), including the year-end holiday season. At the midpoint of that guidance (revenue $8,000M, net income $123.5M, 189.4M shares), year+1 grows 19.6% versus TTM with a net margin of only 1.5% — GAAP earnings remain depressed by the same intangible amortization, which the company guides at $618 million for the year. Beyond year 1 there is no company guidance: the path decelerates with the method's standard discipline, but with one declared exception — year+2 (fiscal 2028) is the first full fiscal year with Grand Theft Auto VI on the market (year+1 captured only about 4.4 months), so the base case does not decelerate immediately: year+2 growth holds in line with year+1 (instead of falling, as R3 would normally require without this event) before decelerating sharply starting year+3, once the initial launch impulse fades and what remains is the recurring business (Grand Theft Auto Online in the pattern of the prior franchise, the rest of the Rockstar/2K catalog, and Zynga's mobile business). This 'plateau before decelerating' shape is explicitly declared as the R3 exception analogous to valley-and-recovery, pointing the opposite way (a documented acceleration, not a drop): the evidence is the company's own release citing the launch as the reason for guidance, plus the track record of Grand Theft Auto V (more than 225 million units sold) and Red Dead Redemption 2 (more than 80 million), which show multi-year runs of sustained sales after a launch of this scale. Margin recovers in parallel through two channels: the normal operating leverage of very high incremental-margin digital content (78% of FY2026 revenue is already recurrent consumer spending) and the relative dilution of Zynga's intangible amortization, which the company guides as an approximately fixed-dollar charge — so as revenue grows, that charge weighs progressively less as a percentage. Year-5 net margin (15% in the base case) sits below the EBITDA guided for year 1 (12.8% of revenue) to conservatively reflect that a good part of that amortization burden is still in effect. Valued on P/E over net income (`valueMetric: "ownerEarnings"` via the `netMargin` series, the same as other content producers with material SBC): stock-based compensation (5.2% of revenue, but 103.9% of reported FCF in the TTM — the TSLA case) is already expensed in GAAP earnings, so the P/E needs no further adjustment. `cajaStart: 0` and `deuda: 0` because funding is already reflected in net income via interest — net debt ($693 million as of Jun 30, 2026) and cash are handled in the ficha's bridge, not within the year-model. The tax rate (`taxRate: 0.18`) is the management rate the company itself discloses and uses for its fiscal 2027 guidance (Aug 7, 2026 8-K: the company anticipates an 18% management tax rate), preferred over a historical average distorted by impairments and losses in fiscal years 2023-2025. With no material share buybacks over the last three fiscal years and no dividend declared (`accumulateCash: false`, no `sharesPath`): cash is retained to fund pipeline development.

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $193 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $214, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $193 in 5 years and a required return of 4.5% annually, the maximum to pay today is $155. Against the current market price ($214), the margin of safety is -38.3% (trades above the maximum → a premium is paid) and the total return at that price would be -2.1% annually.

• Today's multiple not interpretable. TTM earnings are negative; the valuation runs on year-5 earnings.
• Price already reflects optimism on Grand Theft Auto VI. The disciplined base case does not clear a clear margin of safety at today's market price.
• Exit multiple at the center of the band. 18x on year-5 net income, within the [15,20] band for the video-game archetype.
• Wide bear-bull range. The outcome depends almost entirely on the execution of a single launch; the range between scenarios is wide.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✕ ROIC exceeds the cost of capital (~10%)
• ✕ CFROIC backs up the ROIC (0%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Predictable cash generation. TTM OCF barely covers capex and stock-based compensation; predictability improves only once Grand Theft Auto VI launches.
• Return on capital currently negative. TTM NOPAT is negative on $4.3 billion of invested capital — below the 10% bar.
• Clear reinvestment runway. In-house production of the next NBA 2K, PGA Tour and WWE 2K installments and Zynga's pipeline.
• Stock-based compensation material against the flow. 5.2% of revenue but 103.9% of reported FCF — reported free cash flow overstates what is left for shareholders.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

The central driver of the thesis is not volume × price in the traditional marketplace sense, but the combination of full-game sales (a one-time launch bump) and recurrent consumer spending (the live-services monetization tail that follows). 78.1% of fiscal 2026 revenue is already recurring, which reduces — without eliminating — dependence on the release calendar. Grand Theft Auto VI, launching in November 2026, will temporarily shift that balance toward full-game sales before converging back toward recurrent spending as Grand Theft Auto Online scales.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Single-event catalyst. Grand Theft Auto VI dominates projected five-year growth.
• Mobile growth decelerating. Zynga grew 13.3% in FY2026 versus 23.7% for console — the second engine is losing relative traction.
• Guidance reiterated, not cut. The company reiterated fiscal 2027 guidance in August 2026, with no signs of deterioration in the reported quarter.
• Growing recurring base. Recurrent consumer spending grew 16.1% in FY2026, faster than full-game sales in absolute dollars.

• Proprietary intellectual property. Rockstar and 2K develop in-house; no third-party royalties owed on the flagship franchises.
• Concentration in a single launch. Grand Theft Auto VI concentrates the five-year thesis; a single event decides the entire base case.
• Increasingly recurring revenue. 78.1% of FY2026 revenue is recurrent consumer spending, not full-game sales.
• Dependence on third-party platforms. 91.0% of mobile revenue flows through Apple and Google; console requires Sony/Microsoft approval.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✕Leverage (net debt / EBITDA)Net debt / EBITDA 19.8x
• ✕Interest coverage (EBIT / interest)EBIT ≤ 0 vs interest $0.1 bn
• –Liquidity (current ratio)no data
• –Cash quality (CFROIC vs ROIC)ROIC ≤ 0 (see value creation)
• ✕Value creation (ROIC − 10% bar)-13pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 0.8x — no over-investment
• !Float / working capitalConsumes cash $0 bn (positive WC)
• !Dilution (SBC % of revenue + shares)SBC 5.2% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Modest net debt. $693 million of net debt against a market value of about $40 billion.
• Solid cash and equivalents. $1.83 billion of cash and short-term investments as of Jun 30, 2026.
• No dividend to sustain. No dividend commitment limiting cash flexibility during Grand Theft Auto VI production.
• Impairment of an unannounced title. A $43.4 million charge in 1Q FY2027 for the cancellation of a title in development — execution risk across the broader pipeline.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Leadership continuity. Strauss Zelnick as Chairman and CEO since 2007, with a long record leading capital allocation.
• No buybacks or dividend. All cash is retained to fund development; no capital returned to shareholders over three fiscal years.
• Zynga acquisition (2022). About $12.7 billion paid; intangible amortization still weighs on GAAP earnings four years later.
• Director and executive ownership. The 2026 proxy reports about 7.0% beneficial ownership by the leadership group, with no individual breakdown available.

• Motivated sellers — GAAP earnings depressed by a non-economic charge: amortization of Zynga acquisition intangibles (about $618 million a year) sinks operating income and net income without reflecting the underlying business, which already generates positive and growing EBITDA.
• Missing buyers — coverage and buy-side flow uncertain ahead of launch: the market is waiting for real evidence of Grand Theft Auto VI's reception before committing to the high end of the thesis, which can leave the price lagging value if the launch meets expectations.

The base case, disciplined and anchored to the company's current guidance without stacking optimism, does not produce a clear margin of safety at today's market price — the market already pays for a considerable part of the expectation around Grand Theft Auto VI. There is no clean discount source beyond the accounting distortion of Zynga's amortization: No margin of safety: the price already discounts a demanding scenario.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at -23%/year (-72% total): the margin of safety protects the downside. The bull (+7%/year, +39% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Dependence on a launch. Grand Theft Auto VI concentrates the thesis; a delay or poor reception would hit results directly.
• Platforms that are competitors. Apple, Google, Sony and Microsoft control distribution access and can change terms unilaterally.
• Cybersecurity. A track record of material incidents that have already occurred, including a leak of Grand Theft Auto VI development material in 2022.
• Customer concentration. The five largest customers account for 80.6% of fiscal 2026 net revenue.
• AI regulatory and reputational risk. The regulatory framework is evolving and competitors could use AI to replicate successful titles.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  Fails the quality gate: ROIC -3% does not clear the 10% bar.

• Peter Lynch Growth at a reasonable price (GARP)

  A fast grower, growing 15% — no conclusive PEG to judge the price.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  ROIC -3%; earnings yield not computable (EBIT or EV not positive).

• Howard Marks Perception vs reality + cycle

  The price discounts 150% vs our 15%: priced for perfection, no favorable mispricing.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -23%/yr over 5y (material loss) → risk of permanent capital loss.

• Pat Dorsey Moat strength (Five Rules)

  A narrow moat, stable; sources: intangibles, switching costs, efficient scale, network effects → partially passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  The price demands 150% growth, far above our 15% — heroic assumptions.